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BlackBerry Is About to Get Crushed

BlackBerry (NASDAQ:BBRY), the tech stock formerly known as Research In Motion, is off almost 30% from its January highs.

Thus, the million-dollar question for BlackBerry shareholders is whether the company is just pausing for a breather before it continues its ambitious return to smartphone prominence … or whether BBRY was simply a great swing trade to end 2012, and it’s now time to run screaming.

Those who have lit me up in the comments section for the past few months have no question over what side I line up on here – just take this Jan. 8 headline, “I Still Think RIMM and BB10 are Doomed.”

I won’t rehash my past concerns beyond simply mentioning the obvious: that this is an all-or-nothing period for BlackBerry, a company currently operating in the red and seeing continued erosion of smartphone market share. If the Z10 and Q10 fail, BlackBerry has some patents and software clout … but literally nothing else going for it.

Unfortunately, here’s why I think the Z10 and Q10 are doomed:

Poor Initial Demand Concerns: The BlackBerry admittedly has a global following, unlike the Apple (NASDAQ:AAPL) iPhone which many claim is a distinctly American gadget that lacks international dominance. But the initial launch markets haven’t been much to sneeze at. Consider a report this week shows a U.K. sales slump right out of the gate, with poor sell-through rates and recent price cuts. The story is the same in BlackBerry’s native Canada, with Canaccord Genuity writing that it “reduced our February quarter BB10 smartphone shipment estimates from 1.75M units to 300K units.” That number was later revised back up a bit to 800,000… but still, the more than 50% cut  from 1.75 million doesn’t bode well for other global markets.

Bad U.S. Launch Timing: Regarding the U.S., a recent report hints that the Z10 will first hit the U.S. market on March 15 via carrier AT&T (NYSE:T). Unfortunately, that is just a day after the Samsung (PINK:SSNLF) Galaxy S4 is set to debut. Not a great way to sell yourself, considering Samsung is a transcendent smartphone brand that has already caused headaches for the iconic iPhone.

App Troubles: BlackBerry tried to tout the fact that its new OS has the biggest app universe “at launch” of any smartphone software. Yeah, but that’s just because the company is the last in line and a number of amazing apps have already been developed for iOS and Google’s (NASDAQ:GOOG) Android OS. All BBRY did is ask developers to reprogram Angry Birds or Pandora (NYSE:P) to function on a BlackBerry device — not create unique apps native to BB10. But aside from not having any unique first-movers, the real risk is big-name apps that won’t play with BlackBerry. Consider that Netflix (NASDAQ:NFLX) has no plans for a BB10 app. Or consider that Yahoo! (NASDAQ:YHOO) has killed its BlackBerry app even as it continues to provide stock quotes, weather, email and other content support via apps on Android and iOS devices. So much for countering the old criticism that BlackBerry can’t compete on the app front.

Wall Street Sentiment: Short interest as of mid-February was actually up from January. And although the very high volume in this stock might prevent a dramatic short squeeze, it’s still worth noting that a massive 136 million shares are held short. Don’t discount the negativity on Wall Street and the ability to drive down share prices, even if you think BlackBerry doesn’t “deserve” it. Furthermore, at the end of February MKM partners cut BBRY to “sell” with a target of just $10. And while UBS did raise the company to “neutral,” BlackBerry is already above its forecast of $13 for shares. So clearly Wall Street is not betting on big-time upside here.

So, how can investors play this?

Well, BlackBerry remains volatile, so I would advise against selling shares short lest you get squeezed the wrong way. The safer route in my opinion is to buy puts.

For instance, right before the event, I recommended buying June 22 puts on BBRY (then RIMM) at $17, and investors are near the money on that trade.

I expect continued trouble for BlackBerry and some seasonal softness in the market, so I think it’s possible the stock could fall another 15% to 20% in a matter of months. And heck, should the launch data be ugly, we could get that in just a few sessions.

So, I’m watching the April 5 puts with a strike price of $16.50. Right now, contracts are $3.70, putting you at the money at $12.80. That’s less than a 5% drop from here, which is very reasonable.

Based on the fact that I expect continued trouble for BlackBerry and some seasonal softness in the market, it’s possible the stock could fall another 15% to 20% in a matter of months. Should the launch data be ugly, heck, we could get that in just a few sessions after the company reports earnings at the end of March.

And now, on to the inevitable angry comments below. Let me have it!

Related Reading

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

Editor’s note: A previous version of this story did not mention that Canaccord Genuity revised their Z10 forecast back up after the initial cut. Apologies for the error.

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Comments
  • Benzberry

    *Yawnnnn….zzzzzzz…. Move on, move on …nothing new … Same ole, same ole short stories …..which are patent,y false …. Zzzzzzzzzzz.

  • http://www.facebook.com/profile.php?id=1182944663 Mange Schillis

    Perhaps you should at least get your facts straight before making lousy advise, Canaccord upped their number from 300.000 to 800.000 only a few days after the initial report and if you would do some research of your own you will realise that even 800.000 is probably a low number.

  • J

    there has been many other news stories discounting the articles you cited including the estimate has been re upped to 800k. Thats a pretty big swing making me believe they undercut Blackberry too soon. Hints at their credibility….

  • mobileadmin

    Unsure I ever met a Samsung fanboi. Android has no following (OEM). It’s a hard spec race where one gets a larger screen and cheap (free) phone. The bulk of Android market is still over 50% using a 2-3 year old OS version. When (IF) these people ever upgrade there is no data to show they will stay with Android or that OEM.
    Who cares what you think your just a short screaming for this to be true. Let Blackberry release in the US and see how demand is. They have a comparable device now and a OS that makes iOS look like Windows 3.1. Apple is the one that should be worried as they are pushing out this years rehash with marginal updates just like Blackberry did for years with the Curve line of devices.
    I love the App fanatics. If an App is made first for say iOS and then PORTED to Android, Blackberry, Windows Phone etc its all the same arguement. Is the only App worth using the initial coded one? That’s ridiculouos way to think. Most Apps now are written in very portable code and all devices are capable to render pretty much any App. Obviously you’d gain things coding “to the meteal” on the other platforms based on their own SDK and toolsets but the move is going to be to HTML 5 as it’ll provide code once – use anywhere. Outside of big developers no one has the cycles to make native Apps for every platform. Its also foolish to think Apple or Android will continue to control the market. A tipping point will come where you will need to make a business decision to support 5 million users of another mobile OS or not. Thus the appeal of HTML 5 as it removes the native arguement.
    BTW Sprint has terms with Apple to sell a lot of iPhones so pushing another touch screen is going to hurt that incentive. As we’ve seen demand for iPhone is pretty much done and upgraders are moving to other devices now as marginal updates are not what they are looking for.

  • http://www.healthcarereviews.com/ Paul Fezziwig

    re: Wall Street Sentiment

    Do some research you lazy bonehead, just this week the Short squeeze has begun as they began to cut their losses, the Short position decreased by a whopping 5+%.

  • Bob

    Galaxy s4 debuts March 14 but won’t go on sale in the US until may or June. Did you know that or were you being misleading? Seems it’s ok afterall to launch a phone and then not have it go on sale everywhere the next day. Blackberry got crucified for that, but if Samsung does it, it’s ok. As it is BlackBerry will have at least 2 months to sell the Z10 in the US before the S4 comes out. Time enough to get firmly entrenched and maybe steal some sales from Samsung with people who don’t want to wait until June for the S4.

    • Vijit Coomara

      I just replaced my S3 (had it since last Summer) with the Z10. Z10 blows away the S3 with features that suit the needs of “on the go” people. Now on the Galaxy S4 thing. Well anyone in the know would know Samsung is limited in what they can do with the product. They can improve the hardware, make it bigger or smaller, make a better camera, add some useless UI candy such as eyeball scrolling. What happens when I roll my eyes? That is pretty much all they can do because the OS is same OS as what is on the Galaxy S3. Jelly Bean. Hello?????

  • http://www.facebook.com/profile.php?id=1182944663 Mange Schillis

    You STILL need to get your fact right:

    “but still, the more than 50% cut from 1.75 million doesn’t bode well for other global markets.”

    This cut was because the first number included the US market! When they realised that Z10 won’t sell in the US during february they of course had to remove that market from their february estimate.

  • sonbuster

    articles like this clearly say ‘buy BlackBerry’ ask yourself why is everyone trying to beat BB? if google , samsung, apple and wp are so confident in their strengths, who cares about BB? well the fact is, they do. they fear BlackBerry.

    • Stephen

      In a nutshell.

  • Yogi Keung

    Finally an article with some substance, the Blackberry bulls don’t understand the following:

    1) the fact that Mr Walkley revised his estimates is because he made a mistake initially, nobody is perfect, everyone is entitled to make “one” mistake in their lifetime, in fact, in this biz, I truly believe analyst should be entitled to more than one mistake, maybe two. I’m all in with Mr Walkley, if he saids buy AAPL I buy and if he saids sell BBRY, than sell. Who am I to think for myself, the analyst are “much” smarter than I! I live in Canada, I’ve ask many Rogers and Bell stores in regards to BB10 sales, they all say doing really well. I think they are all lying ?!@, I’m going with Cannacord and MKM all the way. I am not going to listen to GS, Misek or that idiot from Fairfax Financial.

    2) In terms of apps,…all I gotta say is I got my 4 yr old playing all versions of Angry Birds, native I may add, on his Iphone, he is on it 24/7, he loves it! I can’t wait for another native version to come out so I can get it for him. My girls and I stream Netflix during the evening, we each get to watch our own shows on our own Iphones and don’t have to fight over the TV. Top that Blackberry! We sometimes do this at the dinner table even,…ha!

    3) As for the short interest, I am not gonna bet against them. The markets are “efficient”, nuff said

    Thank you Mr Reeves for bringing this to light. It is important that everyone realizes by now that Android and IOS are truly the great masters in the mobile platforms. It should be made law that anyone who dares to compete to immediately brought to jail, no trail needed! It is blasphemy that Blackberry even tries to bring on new technology,…QNX what at joke. I fear every night knowing that QNX is used in nuclear power plants and drive vehicle systems. Are these people crazy.

    Again, thank you Mr Reeves for your well thought out article.

    • jin

      now that funny you no he does not have a Z10 if he did he would change his story. this is a new phone better that apples 5 year old toy .

    • stephen

      Unfortunately your excellent commentary will be lost on Mr. Reeves, I am sure you made him loose all his shirt buttons today.

  • Reality

    We don’t needed to leave angry comments.. Your blowing fake smoke up your phony a$$, you simply copy and paste every short article.. YAWN time to find a new job.

  • static

    This guys an idiot

  • Angelo T

    Another bearish report based on unsubstantiated facts and hearsay. Why can’t we all just wait wait see what happens in 3 weeks when we learn the hard numbers. Reports like this are just aimed at manipulating stock price price destroying reputation.

  • Daniel Kinem

    i’ve seen many trolls commenters, but a troll article writer is a special kind of shart. fail, so hard.

  • c_topher_v

    Oh BBRY. You have become my modern-day soap opera.

  • http://www.facebook.com/KBM.CO Kellen Miller

    I have never really like the blackberry Phones. But they are not going to flop. Remember they can always write an app that will allow them use all of the Android apps. Just like for the Windows Phone with the Blue Stacks app.

  • jin

    I no what your problem is you live in the USA and you dont have a Z10 . so how can you say anything good or bad, its like sex try it you may like it and it will relax you. you can get one next week.

  • Brad S

    I’m so sick of people who have never used a device commenting on how good/ bad it is. Get a life and stick to finance you morons. That goes for any idiot who has never touched something he or she is reviewing.

  • http://www.facebook.com/jorge.albeto.3 Jorge Alberto

    This individual sounds desperate in this article.
    Luckily him for having a job where liers don’t get fired. All those sites you have quoted also are part of your desperate clan or short sellers.

  • Justforfun7

    If you are so in need of attention, you might as well shout “The Earth is flat ! The Earth is flat!” That’s about the equivalent of what you are doing.

  • Ray Beck

    Keep it coming bear boys for whatever your motivation. Love to see Bbry hit $12 so I can buy more Shares.

  • coolheat

    Did you try the new Z10? It’s awesome.

  • Jimmy

    Without a Netflix app, how is any platform to succeed?

  • Warlock

    Which radiated Plant this guy is coming from? I can´t believe that he is able to close his trousers. I´ll do a bet that he is one of the poor guys which put the last money into a putoption on BlackBerry and now screaming like a blowed frog.

  • Vijit Coomara

    Whatever Jeff. I guess you win. You got me here and you got me to comment.

  • Jerry

    Do you guys & gals listen to market news & watch fundamentals like a hawk ? then you lose this game. In the market you have specialist, there is to create a market by writing news, waiting for a news event. Fundamentals, inside buying will be seen in the chart long before you go wow! my cash went right out the door. A professional wants your shares & they will use bad news or create it to get you to sell & will make the stock appear dull. I do not own this stock & if you do, my advice is to sell on good news & buy on bad news. Does the end of the bull market occur on good news ? yes it does. If the news tells you investors are selling, do you sell ? no you do not.. Investors do not sell on bad news, they buy & if they put stocks on the market, it is create fear to buy more shares at value. If price falls on light volume, the investors are not happy.. they need you the seller to sell & so they throw a wab of stock on the market & sure enough here comes the sellers. They will test to see how many sellers come out, the cheaper they can push price down.. the better for them however if no followers come.. they must meet market conditions & mark price down. True weakness is only weakness if it is confirmed such as price advances then stalls & everyone is selling like wildfire then price takes it all & & goes higher the next week. If you wait 10-20 days after any weakness & strength, you will know quality of the that then you can decide what to do. Till then, let the market play it out. If you trade on fundamentals.. do the same thing.. create a watch list, the best you can of the best & keep adding criteria till you get no more then 4 stocks. Each of those stocks in your ideals is the best. Trade any one, it does not matter but wait 30 days. That is do your watch list when the market is in it’s peak, find only a few that perform better then the market that have fundamentals you consider the best of the best. Wait for the market to decline.. 30 days later after this list, look at each chart of those 5. Which one has comparative strength, compare one with another. Your result will be a true winner. This works because any stock that has buying power before it declines & takes losses has reached a over bought condition.. that is buying power. This means sellers will come in & if sellers don’t have as much luck in one stock over another & tends to refuse to follow the market down aggressive then you have a winner. Buy that puppy. To many traders look at today & buy it. True strength is having strength then how that stock behaves 20 days later.

    For those who want logic on bottoms, bottoms will have 2 over sold conditions & one over bought condition. The first over sold condition has selling behind you & risky, Wait for buying to behind you (buying power), this means 20 days later of so, wait for the stock to be over bought then how that stock behaves on it’s second over sold will show strength or weakness. This works because over bought means short selling & if the selling on the second over sold is lesser then the bear power of the first over sold then you best buy that puppy. Price may have to play a bit before going anywhere but once you have that second over sold with no bear power or power greater then the first oversold then your going higher but you must have buying power behind you which is why you wait for over bought as this shows good demand for the stock. Once you have that demand, you want to see how much selling comes out as you reach over sold. If the buying power wave is greater then the selling wave then buy that puppy. Markets is all about supply & demand.. you will win every time if you follow supply & demand.

  • jesus

    I have more hair on my balls then you have on your head. The best colour is blue. The number 7 sucks. See, I can write meaningful objective statements just like you.