I first wrote about the BlackBerry (NASDAQ:BBRY) stock just over a month ago, where I explained why I believed that the BBRY stock hadn’t been revalued since the company had dropped out of the smartphone hardware race and re-branded itself as a forward-thinking software company. The original article can be found here.
Since that article, written on Mar 17th, the BBRY stock has rallied to over $9 where it has sat for the majority of this week, representing a 30% return in this time frame. The company reported a positive earnings-per-share figure in the last quarter which beat analyst expectations and this was followed by a significant jump in the BBRY stock price. As the initial effect of the news began to wear off, bullish investors of the stock were met with the news that BlackBerry had won $800 million from royalty overpayments made to Qualcomm (NASDAQ:QCOM) which provided the second price jump. After the award, BBRY was left just below the $9 mark, a hurdle that it has since climbed over, reaching highs that have not been seen since 2015. Following all of this news, I thought it was time to reassess the BlackBerry situation and see what the company has to offer in the near future, and to ultimately decide whether BBRY remains an investment opportunity after the 30% rally seen in the chart below.
There is a lot going on with the BlackBerry name in May so I expect that the BBRY stock will mirror many of these movements and remain in the limelight for, certainly, the near future. May will immediately begin with the evaluation and review of the first TCL smartphone instalment under the BlackBerry brand: the KeyOne. The KeyOne has been released with global exclusivity in London, UK, and a host of reviews are coming in about users’ first 24-hours with the phone. There appears to be a lot more to be optimistic about with this instalment and signs that this is the piece of outsourced hardware that BlackBerry have needed since shifting their business away from this area. A positive reaction to the KeyOne release will be vital to secure sales worldwide and bullish BBRY investors will need to keep an eye on how consumers react to the latest edition of physical keyboard smartphones. As May draws to a close, so will BlackBerry’s first quarter of FY2017; the official end date is May 31st, to be reported on in late June.
Also late in the month, we will see the Qualcomm arbitration case money committed to BlackBerry. CNBC reported that May 30th will be the date that the payment is finalised and received by BlackBerry. There hasn’t been much in the way of saying what management will decide to do with this new pot of cash but investors will be looking for positive signs that the company is accelerating its growth into the software space and in particular, perhaps, the self-driving car market. Those backing the BBRY stock will hope to hear a shortlist of potential acquisitions targets for BlackBerry to expand their software horizons and commit to their transition away from hardware production.
As explained in these two articles, there is also potential for two future pay-days, similar to the QCOM filing that would further bolster the BlackBerry balance sheet and lower the company’s risk level. They are law suits against Nokia (NYSE:NOK) and Avaya. If either of these cases pull through then BlackBerry will be left with an enormous cash surplus, furthering the chance of acquisitions for the company moving forward in to the software industry.
In an effort to boost revenues, BlackBerry have also created a subscription service to the famous BlackBerryMessenger (BBM) platform – allowing app developers to build BBM into their systems to create a seamless, secure communication platform within their developments. The next earnings report will give a rough idea of how large a revenue stream that this may prove to be but initially it seems like a promising step in the right direction for the company to try and turn towards a positive net income figure.
To conclude, I am still bullish on the BBRY stock and the company’s turnaround prospects. I believe that the KeyOne should be a success for the smartphone market niche that it is aiming at and this will filter revenue through to the BlackBerry brand. The company’s efforts with hardware outsourcing have been successful and I believe that they are beginning to turn around the public’s opinion on their re-branding. However, there does still remain a large element of risk with the BBRY stock because with every tailwind and rally in the stock, there seem to constantly be a large number of bearish investors trying to keep the stock down. Short interest has grown again following the last month’s 30% rally but I believe that this will do little to undermine the positive strides that BlackBerry have been taking recently.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.