Veteran investors may recall how Canada's Research In Motion, which sold the wildly successful BlackBerry smartphone in the 1990s and 2000s, was a super stock. And in early 2004, BlackBerry stock — known by the ticker symbol RIMM at the time — built the gold standard for a rare IBD-style chart pattern: the short stroke.
XA lot has changed since then.
BlackBerry (BB) doesn't make smartphones anymore. Yet the midcap firm, with a $3.9 billion market value, actually beat the market last year with a 41% gain in 2021.
Yet BlackBerry stock has definitely cooled off a lot since June, when Wall Street analysts downgraded the stock. One reason? Cybersecurity-related sales in the May-ended fiscal first quarter of FY 2022 dimmed by 12% vs. the prior quarter.
Rebound attempts in August and mid-October to early November of last year fell flat. By December, shares sank to new 52-week lows.
BlackBerry Stock: Trying To Crack A Downtrend
BB rebounded sharply after hitting a low of 5.80 ahead of February-ended fiscal fourth quarter results announced last week. On March 31, BlackBerry reported that Q4 earnings fell 50% to a penny a share on a 12% dip in sales to $185 million.
The stock reversed for an 8% drop for the week ended April 1 in the heaviest volume in more than five months. Yet it's still holding a 16% gain from the 5.80 near-term low.
So, is Blackberry stock a buy?
This story will examine the stock through the lens of IBD's time-tested, research-driven CAN SLIM method — a seven-point paradigm for successful stock picking. A look at fundamentals, technical action and mutual fund sponsorship can help you make an informed choice.
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BlackBerry Company History
Founded in 1984 in Waterloo, Canada, BlackBerry's internet-enabled smartphones became iconic during the dot-com bubble and even after the Nasdaq's market top in 2000. During the first half of that decade, BlackBerry became so addictive that some users called their devices "CrackBerry." Former U.S. President Barack Obama used one in the White House.
But as competition stiffened in the smartphone space and the growth of BlackBerry's sales and profits lost luster during the back half of the 2000s and early 2010s, the company made a pivotal switch.
Today, the company, led by CEO John Chen, provides security software and services to enterprise and government customers globally. BlackBerry says it secures more than 500 million endpoints, including 175 million cars on the road today. It employs artificial intelligence and machine learning to keep customer data safe and private.
On May 17, 2021, the company announced BlackBerry Optics 3.0, a next-generation cloud-based security product, as well as a new zero-trust network access product called BlackBerry Gateway. Earlier in that month, Frost & Sullivan named BlackBerry an innovator in health care cybersecurity. Plus, Chinese EV maker WM Motor said it chose BlackBerry's QNX branded products to power its advanced W6 SUV.
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A Cybersecurity Play
Clearly, cybersecurity has grown to a majority of BlackBerry's top line — 61% of the company's $174 million sales logged in the fiscal first quarter ended in May, for instance. In the November-ended fiscal third quarter, BlackBerry's cybersecurity revenue reached $128 million, or 69.5% of total company revenue of $184 million.
On Aug. 31, BlackBerry moved from IBD's Computer Software-Enterprise industry group to the security software industry group.
On March 21 this year, BlackBerry said it would expand its collaboration in China with Marelli's China unit. Marelli, a leading Tier 1 global automotive supplier, has chosen the BlackBerry QNX Neutrino real-time operating system and the QNX Hypervisor product to power its in-vehicle infotainment and digital cluster functions.
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BlackBerry: Will It Be A 2022 Meme Stock?
Equity and option traders joining the WallStreetBets thread on Reddit and other online social platforms have orchestrated stunning campaigns to send not only BlackBerry stock to stratospheric heights. They've done the same with AMC Entertainment (AMC) GameStop (GME), Bed Bath & Beyond (BYND) and Clover Health (CLOV).
BlackBerry stock has also captured attention as one of a cadre of companies that have been heavily sold short in recent years.
Judging by the spectacular move BB stock made in the final two weeks of January 2021, no doubt BlackBerry has symbolized the intention by Robinhood app users and other traders to go after short sellers.
Short sellers sell shares borrowed from a broker. They hope to buy those shares back at a lower price for a tidy gain. But when a stock surges in price, the shorts get forced to buy back shares and close the trade — especially when a trading account is already on margin.
Short covering can act like nitro to a rising stock.
The skyrocketing move by BlackBerry over a four-week time period, going from 6.63 at the start of January that year to a peak of 28.77 on Jan. 27, illustrated the dangers for short sellers today.
Short interest in BlackBerry stock — or total shares sold short on Wall Street — is no longer extreme.
Short Interest And BlackBerry Stock
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A total 38.3 million shares have been sold short, according to data analyzed by MarketSmith. It would take 4.3 days' worth of BlackBerry's average trading volume of 8.9 million shares for the short sellers to buy shares and cover their bearish positions. Put another way, at 7% of the stock's float of 562 million shares, short interest now sits at a relatively normal level.
Meanwhile, please study BlackBerry stock's action in the final two weeks of January 2021. BB stock engineered a climactic top. Shares rose 105% during the week ended Jan. 29 before retracing nearly all of that gain by week's end.
In other words, its vertical-like move was unsustainable.
IBD Ratings Today
BlackBerry's fundamentals do not measure up to, say, those in IBD's Long-Term Leaders.
Wall Street expects a net loss of 15 cents a share in the fiscal year ending in February 2022. And now, analysts' prior forecast of a profit of 3 cents a share in FY 2023 has worsened to an even bigger net loss of 24 cents.
Since earnings tend to be the No. 1 factor for a stock's growth prospects, it may come as no surprise that BlackBerry gets lackluster ratings from IBD. The stock still shows a damp Composite Rating of 18 on a scale of 1 (mauled) to 99 (magnificent). The SMR Rating, which analyzes sales, profit margins and return on equity, is a worst-possible E on a scale of A to E.
BlackBerry holds an undesirable Earnings Per Share Rating of 12 on a scale of 1 to 99. Generally, you want to focus your watchlist of stocks of those with EPS and Composite scores of 80 or higher.
Who Is BlackBerry Owned By?
That said, institutional ownership has been rising.
Total mutual funds investing in BlackBerry stock dipped to 484 at the end of the second quarter in 2020, when coronavirus ravaged the world economy. That number has grown to as high as 577 at the end of 2021, a good sign.
A stock seeing growing mutual funds ownership and attracting top-notch institutional players is meeting the I in CAN SLIM, or solid institutional sponsorship.
Is BlackBerry Stock A Buy?
A 16 Relative Strength Rating means BB stock outperforms only 16% of all companies in the IBD database over the past 12 months. That's down a 37 in December. In general, you'd like to see a score of 80 or higher. A 90 RS Rating or 95? Even better.
The latest price slide began after BlackBerry's rally stalled in the week ended Nov. 5, 2021. BB continues to work on a deep cup. A true handle has not yet formed. Such action would hint at a final shakeout of disenchanted holders who bought at higher prices, eager to get out with a small gain or to cut losses after sitting with a huge paper loss.
For now, the current buy point stays at 12.49, 10 cents above the current cup's left-side high. At this point, however, BB needs to overcome an overhead supply of eager sellers at the 8-to-10 price level.
Retaking the 200-day moving average would be another technical development.
So for now, the stock is not a buy yet.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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