Not so fruitful

Dried Berries
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BlackBerry Stock Is NOT a Buy Under $10

BlackBerry (BBRY) is back in the single digits, and there it will stay.

Shares remain above 2012 lows, yes, but are below $10 to tally a 50% flop from highs of $18 in January. And as I have said many times — most recently to start the month — BlackBerry stock has no hopes of recovering anytime soon.

The reasons are simple: The stock had gapped up to start the year based on hopes of a turnaround thanks to the BB10 operating system and a new line of BlackBerry smartphones in the Z10 and Q10. However, BBRY has failed to live up to expectations, and investors are giving up hope.

The latest catalyst was a surprise quarterly loss after disappointing device sales. It’s hard for BBRY to make excuses about those numbers — most notably the fact that the new line of BlackBerry smartphones made up just 40% of quarterly sales despite several months since a highly-touted launch for the gadgets.

This disappointment came even as two top competitors, Samsung (SSNLF) and HTC, posted quarterly sales reports that fell short of expectations. You would think that weakness would mean an opportunity for BBRY to step in … but apparently not.

Anyone hoping that a refresh would put BlackBerry on equal footing with Google (GOOG) and Apple (AAPL) was simply being naïve. The iPhone remains wildly popular with consumers and the sheer reach of Android thanks to phones make both Apple and Google almost uncatchable in the near-term.

But it wasn’t outside the realm of possibility for BB10 to give Microsoft’s (MSFT) Windows Phones a run for their money. But unfortunately for BBRY investors, that hope of enterprise inroads hasn’t been as fruitful as expected.

So where does BBRY stock go from here? Well, if you believe BlackBerry CEO Thorsten Heins, we haven’t even started to see what the new line of devices can do. Heins asserted BlackBerry is “still in our launch cycle” and that the company simply needs more time to spend on marketing and device rollouts to achieve dominance once more.

Investors shouldn’t buy that. BlackBerry remains unprofitable, as the latest earnings report just proved, and will be only slightly better than break-even this fiscal year if it continues to fall short of expectations.

Wall Street seems to have moved decidedly from giving BlackBerry the benefit of the doubt to expecting BBRY to fail. To start the month, the stock was downgraded from “buy” to “hold” at Societe Generale on Monday after disappointing numbers. Analysts at Needham & Company and Deutsche Bank also downgraded BlackBerry after the results.

Elsewhere, FBR reiterated its “underperform” rating while dropping its target from $11 to $9, and UBS kept BBRY at “neutral” but dropped its target from $13 to $10. So with investor negativity and sales numbers disappointing, the tape should continue to trend decidedly down in the weeks ahead.

Proponents point to software and other assets that are being undervalued by Wall Street amid the focus on BB10 launches. And it’s true that BlackBerry has traded at a fraction of its book value for some time — even during the big run to start 2013.

But despite $630 million in cash flow from operations and about $2.8 billion in cash, the undeniable reality is that the company will bleed itself dry without a successful line of hardware. Maybe not anytime soon, of course, but inevitably BlackBerry will fade away if it can’t get smartphones right. Judging by recent BBRY stock declines, investors aren’t willing to stick around to wait and see if the company can get it right.

If you’re still hanging on to this stock, you should follow their lead.

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.

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Comments
  • MXH070

    How many windows phones did nokia sell in 2011? If I remember it was 2.1 million for a full year of sales and nokia has only sold 20 million windows phones since 2011. Blackberry sold 1.7 million in a half first quarter and additional 2.7 million second quarter already ahead of nokia windows phones out of the gate. As for the company losing share value look to apple as it has TANKED as well.

    • Arun Lobo

      Sorry but your figures are utterly incorrect. First, Nokia released it’s first Windows Phone in NOVEMBER 2011. Second, Nokia’s quarterly results are due tomorrow. So the 20 million phone figure is not upto date. Third, blackberry sold 1 million not 1.7 million BB10s in first quarter. Fourth they are not ahead of Nokia’s windows phones. Fifth, the market in 2011 was very small compared to what it is today. You need to look at percentages, not absolute figures.
      Finally, the one place where you were correct is apple’s share falling.

  • Frank Cout

    Actually they got the phone right, the BB10.2 is so powerfull it will run the latest Android version apps , What needs to happen is have more phones in peoples hands , reducing the price in the US could actually cost less than a large Mkt campain .

    • ralph

      If you want to run Android apps, get an Android phone.

      Do you buy a Chevy to run Ford parts?

      • blogpedia

        Have you heard that planes fly with engines manufactured by different companies?

  • Kurt Windibank

    It isn’t all about hardware….al though when you look at Hardware Q1 results did not include Q10 in the majority of its global markets …nor the Q5. Device sales will improve….and it looks as though its 5 inch Phablet entry is forthcoming.
    The real turnaround story with BlackBerry lies in BES 10 MDM management. Opning up to iOS and Android with its BES 10 Secure Works gives BB an opportunity to make some serios service revenue gains in the HIGH MARGIN area of Mobile.
    Throw in the QNX story which is now a Tier 1 automotive offering with its CAR2 platform and BB’s recently announced OTA offering which allows automotive makers the ability to use BlackBerry secure network to push out software updates and you have the makings of another serious revenue stream…again in the HIGH MARGIN area.
    BBM Cross platform is a wild card…if they can gain a large user base then the monetization will follow. Currently 60 million users…if each invites 10 non BB users to BBM you could potentially overtake Skype in a very short period of time. Throw in BBM Channels and BBM Money and you have some opportunity.
    Hardware sales are important NOW…as they transition the business…however ALL hardware makers are facing the crunch of lower margins. Its a good move by BB to focus on the areas that they can make some better inroads to future growth.
    Licensing BB10 OS is another area where they can gain some revenue.
    BB is far from dead.
    Oh…and cash is 3.1 billion…your article is incorrect.

    • reality hurts

      Yes, iPhone and Android users want to fall victim to service outages just like blackberry users…. NOT!

      Those clowns can’t even keep their internal servers running.

      p.s. NOBODY wants to licence bb10.

      • Kurt Windibank

        Yes..iMessage never goes down

  • Aristotle5

    The writer obviously does not understand what BBRY is doing and where they positioning themselves. The stock is a screaming buy at the current price. Unfortunately, too many journalists are just that journalists. They do not understand technology, accounting, economics, or finance.

    • Omnivore

      You ignore the most important part: nobody at RIM/blackberry know what they are doing.

  • blogpedia

    Nice photo by the way – those dried ones really taste good and they also have medicinal value – just in case you are not aware. So you see even though you think they are all dried out there is a hidden benefit to it – try it sometime, it has absolutely no side effect like most other medication :)

    Anyway back to the topic – don’t write the obituary on $BBRY just yet. BB10 10.2.0.xxx is an impressive improvement over 10.1. I installed it yesterday on my Z10 and I personally think that it should have been the baseline OS and $BBRY should do its level best to push it out as quickly as possible. It incidentally provides full support for Jelly Bean 4.2.2+ and Netflix loads faster on the 10.2.0.483 build – which currently doesn’t have the full Jelly Bean 4.2.2+ support. But the good part of this is that you can see right in front of your eyes the substantial improvements that are being put out in these .x releases.

    Since MXH070 has already covered details on unit sales. Let me add that Thorsten had guided on near break even quarter all along. Second, if you look at the numbers you will see the drop can be accounted for by the Venezuela effect (72 million) and the one time jump in licensing fee of about ~95 million. If you take those out then I will leave the simple math for you to figure out that the quarter wasn’t bad as you portray it to be. The drop in 4 million subscribers is something that was expected (and $BBRY had mentioned about this single digit percent drop all along – so it shouldn’t be a surprise on that front either).

    IMO, this recent correction in $BBRY stock is a knee jerk reaction – folks are discounting this stock to ~$3 (sans the cash on books) – which is below Nokia’s current stock price – which incidentally carries quite a bit of debt on its books.

    To sum this up, you are getting the stock for free at today’s price – but then that goes against your thesis so I will not say anything further to spoil your party :)

    • ed

      Write the obituary.

      Heins, it doesn’t become a CEO to post anonymous praisefor a POS product.

  • yup

    nice picture – slow clap – BTW, this is a blackberry ->http://en.wikipedia.org/wiki/Blackberry

  • hofjac

    Where do they find these goofballs. This moron would not know a blackberry if it hit him in the ass.

    • bb boo-boo

      Very true… blackberry and ass are almost indistinguishable from each other.

  • Brian

    “However, BBRY has failed to live up to expectations, and investors are giving up hope” Actually, BBRY did exactly what it said it would do in Q1, which is break even…Which is what they pretty much did sans the Venezuela currency issue. You know what expectations they did not meet? The shorts, and maybe over optimistic bulls, who came out 1-2 weeks before ER to pump up expectations.

    “Investors shouldn’t buy that. BlackBerry remains unprofitable, as the latest earnings report just proved, and will be only slightly better than break-even this fiscal year if it continues to fall short of expectations.”

    Remains unprofitable with $600MM in cash flow last Q. Riggggght.

    No q10 sales (You know the whole thing that separates them from competition???) in north america last quarter and 2/3 Q of z10 sales.

    Please do more research or stop writing these empty, baseless, opinions.

    • cinnamonchic

      honey These articles show up on Android owning Google.
      Im going to repost what I wrote.

      I can get anyone to sell me their Z10 nor q10 for a lost.
      but the market is flooded with “retina, I have nothing new to offer Iphone 5 & Annoyeds . QUICK SEARCH OF EBAY.

      bb ceos are just weak bitches…

  • cinnamonchic

    my 2 cents

    Blackberry Z10 is the best phone out there. (Apple & Andriod, Windows..ah)

    HERE COME THE CONSPIRACY:

    1. Did anyone be me notice that Blackberry is the only competitor with out a Search Engine Company???

    a. Apple = Safari.
    b. Android= Google
    c.Windows=Bing/Yahoo
    It does help BB if all 3 blocks support of your device. Especially when the #1 Search Engine (if that what Google call itself still) blocks all BB support including Gmail.

    2. Why Im smarter than BlackBerry CEO… “when you read stories on Google search (lol) saying people are returning your products But there is no data or err…not flooding EBAY/Craigslist. You’ve got a PR problem.

    2b. When professional writers review your products with no CONS. but rate it 5/10. You’ve got a PR problem.

    Blackberry’s problem is it a Canada Company. This company has no “rachet” DNA and cannot fight.

    Apple is an American co and can fight. It fought China, It fought off Google’s heavy promotion of Android. It fought off Adobe Flash ie Youtube videos, ie online porn is only in Flash issues.

    Blackberry stock is worth about $9.00 today & keep tankin’ because they hired 2 idiot CEO in a row. Holla at me if you need a new CEO (no joking)

    NO SKYPE ..smh

    marketing: Alicia Keyes?.. put a BB in Rihanna’s hand or Justin’s.
    CALL ME IF YOU WANT your Marketshare back.