BlackBerry (BBRY) is down 25% year-to-date after the flop of its Z10 and Q10 launches, and investors should steer clear of this dog of a smartphone stock if they know what’s good for them.
According to one BlackBerry stock analyst, it’s not just continued steady declines that are a risk, but the very end of BBRY altogether via a strategic breakup or liquidation.
Analyst Kevin Smithen of Macquarie Group has gone on record saying that BBRY has failed at the consumer market and is slowly losing business customers, too.
This unfortunate truth will not change for BlackBerry stock, now or in the coming quarters.
“The future is bleak for BlackBerry as an operating business, in our view,” he wrote after ugly Q1 BlackBerry earnings. “BlackBerry has yet to adjust its supply chain for lower BB10 unit sales. We are concerned that rising BlackBerry and channel inventories could cause a significant drawdown in cash over the next few quarters.”
He went on to say that BlackBerry’s last option would be liquidation or breakup. And then he compared it to Palm, the disaster of a mobile company that was foolishly purchased for $1.2 billion by Hewlett-Packard (HPQ), which subsequently was forced to write down $885 million of that just a few years later.
Not a pleasant comparison, but I couldn’t agree more.
I have been bearish on BlackBerry stock for quite a while, for more reasons than I can count. But a short list includes:
- BlackBerry’s CEO thinks tablets are a fad, showing how out of touch with the market and consumers the company is.
- The Z10 and Q10 smartphone launches flopped hard, resulting in a surprise quarterly loss for BlackBerry stock at the end of June.
- CEO Thorsten Heins continues to ask for patience despite being unprofitable with an unattractive smartphone line that consumers don’t want.
- BlackBerry stock is a value trap, trading for a fraction of book value all across this year — even when it gapped up to $18, twice where it’s at now.
If you think BlackBerry stock is going to turn a corner anytime soon, keep in mind that the Z10 and Q10 were meant to simply bring the company onto equal footing, ostensibly, with Apple (AAPL) and its iPhone and Samsung (SSNLF) and its Galaxy phones. It failed miserably, and now an iPhone 5S or iPhone 6 is likely to hit the market in a few months to put BBRY farther behind.
Some make an argument about BlackBerry security and messaging advantages. But as Smithen hints at, those assets are losing value by the minute and other enterprise competitors keep moving in. Apple is not sleeping on enterprise, and Microsoft (MSFT) continues to throw money at the market with its Windows Phone OS and Lumia partnership with Nokia (NOK).
And then there’s Google (GOOG), with its Nexus line and neverending quest to outdo anyone in the tech sector. I wouldn’t count Google out, either.
There just isn’t a way out here for BlackBerry stock. Consumers have forgotten the brand, businesses are struggling to see its appeal and each passing day BBRY loses more money and sees its patents and software assets become less relevant in a fast-moving smartphone market.
Investors betting on a dead-cat bounce for BlackBerry stock here might get a brief one … but the long-term trend is decidedly down, and as Smithen writes, it will likely end in either bankruptcy or a breakup so it can be sold for parts.
- More on why BlackBerry stock is not a buy. (The Slant)
- Immediately after earnings, Jim Cramer said to sell BBRY before it gets “really bad.” (CNBC)
- Hope springs eternal, though! BlackBerry’s Q5 capitalizes on shift away from high-end devices … yeesh. (Globe and Mail)