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BlackBerry: No Sell Off Or Short Squeeze

Monday - 4/8/2013, 4:30pm  ET

Over the past few months, few stocks have divided investors as much as BlackBerry . Since the company changed its name from Research in Motion to BlackBerry and revealed its Z10 smartphone, shares have been on a roller coaster with swings of five percent or more not uncommon. While CEO Thorsten Heins did mention general information about sales, no definitive figures were to be announced until March 28 when the company held its Q4 earnings call. Questions would be answered, BlackBerry’s future would be determined, and either longs or shorts would profit immensely.

BlackBerry battle

Leading up to the earnings call, analysts had all put in their estimates for BlackBerry’s Q4 performance. Estimates for BlackBerry Z10 sales were generally around one million units, give or take a few hundred thousand. Of course, analysts had set various price targets ranging from $7 to $22 per share. These were usually twelve month targets, but most analysts at least partially based them on the Q4 results. However, there was one thing analysts were in agreement on; BlackBerry would post a quarterly loss.

The results are in

This article is being written on the weekend following the Q4 earnings release, a time when BlackBerry’s future was supposed to be made clearer. With respect to results, one million Z10s were sold which missed, hit, or exceeded expectations, depending on who you talk to. Total subscribers decreased more than expected and sales of older BlackBerry devices were slightly short of expectations. But the biggest surprise was BlackBerry posting a profitable quarter when almost no one expected them to do so.

Shares off to the races

With such a critical earnings call, BlackBerry shares were expected to be volatile on March 28 swinging sharply higher as short sellers of the stock get squeezed, or falling hard as selling pressure hits and short sellers dig in. As it turned out, shares rose as much as ten percent before giving up their gains later in the day and finishing down just less than one percent. For a critical earnings call, a final price change of less than one percent is insignificant. It appears in the end, both sides of the BlackBerry debate stuck to their positions and the broader market saw no reason to strongly move the stock in one direction or the other.

The real news

Both sides now seem to be gearing up for the Q1 2013 earnings call as quickly as politicians are gearing up for the 2016 election. Shorts, for the most part, are still short and longs, for the most part, are still long. BlackBerry still faces the same challenges it did yesterday, a smartphone world where Google’s Android and Apple’s iOS have created a near duopoly over smartphone sales. Additionally, Microsoft is working hard to win the third place slot that BlackBerry is trying to grab onto as a foothold to begin growing again.

With a steep share price decline since hitting highs of $700 per share, Apple is now being looked upon as a value stock by many. The basis for this argument centers around Apple's P/E ratio that has fallen to the single digits. In contrast, those who view BlackBerry as a value stock look toward tangible book value and the company's patent portfolio due to BlackBerry's low price to tangible book and lack of current earnings. With a P/E ratio more than twice that of Apple, Google has moved into nearly every aspect of our lives and has become a common verb. While Apple shares slipped as investors feared Apple was no longer innovating, Google is still gaining ground and is fighting with the $800 level. But, for Google, smartphones are just part of the business. With everything from Google Glasses to self-driving cars, this search engine turned giant hopes to make their smartphones just part of your total Google experience.

However, quick success for BlackBerry in the smartphone space is more critical for the Canadian smartphone and services company than for many of its rivals. An occasional miss by Google or Apple will not cause the same threaten these companies in the same way as it would affect BlackBerry. While all three companies offer services as well as hardware, both Google and Apple have a far greater number of up to date products than BlackBerry which is trying to roll out its phones as fast as it can so as not to fall any further behind in the smartphone space. Analysts are also closely monitoring Z10 sales, and soon Q10 sales, and negative reports from them or BlackBerry itself could cause a stock panic as investors run for the exits. Even if this panic is not justified, the effects could snowball dragging down the share price to far lower levels.

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