BlackBerry Stock Is Rallying, But Is It A Buy Now? Here’s What Fundamentals, Chart Action Say
Veteran traders and investors may recall how Canada’s Research In Motion, which developed 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 chart pattern identified by IBD: the short stroke.
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A lot has changed since then, to say the least.
BlackBerry (BB) doesn’t make smartphones anymore. Yet it boasts a market-crushing gain of more than 130% year to date.
BlackBerry stock has also captured attention as one of a cadre of companies that have been heavily sold short in recent years. 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).
So, is BlackBerry stock a buy now?
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, technicals and mutual fund sponsorship can help you make an informed choice.
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, 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 May, Frost & Sullivan named BlackBerry an innovator in health care cybersecurity. And Chinese EV maker WM Motor said it chose BlackBerry’s QNX branded products to power its advanced W6 SUV.
BlackBerry, Meme Stock
Judging by the spectacular move BB stock made in the final two weeks of January, 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 to a peak of 28.77 Jan. 27, illustrated the dangers for short sellers today.
Right now, short interest in BlackBerry stock — or total shares sold short on Wall Street — is not extreme.
Short Interest And BlackBerry Stock
Inside Investor’s Corner: How To Analyze Short Interest In A Stock
Some 50 million shares, or roughly 1.3 times BlackBerry’s average daily turnover over the past 50 sessions of 38.5 million shares, have been sold short, according to data analyzed by MarketSmith. So, it would take less than two days’ worth of BlackBerry trading volume for the short sellers to buy shares and cover their bearish positions.
As a portion of the stock’s float of 560 million shares, it’s a significant level but not extreme.
In late January, 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.
The company’s profits grew vs. year-earlier levels just twice in the past eight quarters. In the November-ended fiscal third quarter, earnings sank 33% to 2 cents a share. Sales dropped 18%. The February-ended fiscal fourth quarter echoed this poor performance: The bottom line plunged 67% to 3 cents a share. A 25% drop in sales to $210 million notched the worst year-over-year drop in at least four years.
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 Composite Rating of 56 is middling on a scale of 1 (mauled) to 99 (magnificent). The SMR Rating, which analyzes sales, profit margins and return on equity, is a lowly D on a scale of A to E.
BlackBerry also gets a 56 Earnings Per Share Rating 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. Yet that number has grown to as high as 548 at the end of Q1 of this year.
A stock seeing growing mutual funds ownership and attracting top-notch institutional players is meeting the I in CAN SLIM, or solid institutional sponsorship. A-rated funds that own a piece of BB stock include Mercator International Opportunities (MOPPX), Vanguard Primecap (VPMCX) and Beck, Mack & Oliver Partners (BMPEX).
On the plus side, BlackBerry stock is showing terrific price strength.
Is BlackBerry Stock A Buy?
The 96 Relative Strength Rating means BB stock has outperformed 96% of all companies in the IBD database over the past 12 months.
And right now, after shares found bullish support at the 200-day moving average — drawn in black in all IBD daily charts and in MarketSmith, the chart shows a new deep-cup pattern forming.
A 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. So, the current buy point for now is 28.87, 10 cents above the cup’s left-side high.
That said, recent action clearly shows the 20 price level is offering near-term price resistance.
So while the stock is not yet a buy now, a strong move past the 20 round number may offer intrepid traders a new entry.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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