BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s stock price target has been lowered again, but BMO Capital Markets analyst Tim Long still rates the stock as Market Perform because of the total value of its assets. He doesn’t think the company has much chance of turning itself around, but its current stock price reflects assets with little hope of recovery.
“We are lowering numbers again as demand for BB10 is severely lacking, and BB7 continues its steady decline. We believe the best course of action for the company is to sell off some or all of its assets. Our updated sum-of-the-parts analysis yields a price target of $7 based on value of cash, IPR, the NOC/relay network, the operating system, and the Enterprise Software business,” writes Long, lowering the target price to $7 compared to a current price of $6.48.
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Eric DeLamarter's Half Moon Capital produced a return of 8% net of fees in the fourth quarter of 2020, bringing the full-year return to 12.2%, according to a copy of its fourth-quarter letter, which ValueWalk has been able to review. The fund maintained an average net exposure of 45% during the period. Q4 2020 hedge Read More
BlackBerry’s assets remain valuable
People have been calling for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) to sell off its valuable intellectual property portfolio and its enterprise software business, by far the two most valuable assets remaining, and call it a day, but a failed buyout bid by Prem Watsa’s Fairfax Financial Holdings Ltd (OTCMKTS:FRFHF) (TSE:FFH) for $9 per share delayed what seemed inevitable.
Now BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is bringing in John Chen as CEO, and he has said that he’s committed to reclaiming the company’s former glory. Chen has a proven track record, and maybe he would have made a difference a couple years back, but the company’s reputation is so badly damaged, and the phone models that were supposed to reinvigorate it have failed so completely, that it’s hard to imagine anything really changing.
BlackBerry could be classic value trap
What seems far more likely is that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) will continue losing money and subscribers, limping along and cutting back on operational costs until someone decides to pull the plug. We’ve already seen the bulk of the drop in share price, so anyone holding a position now is roughly at the floor, but there’s also a cost to leaving money in an unproductive asset.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has already become the go-to example for how quickly a company can lose its grip in the tech sector, but if it struggles on for a few years before closing shop it could also become a standard example for a value trap: a stock with low valuation and little downside, but essentially no prospects for ever going back up.