BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is set to report its fourth quarter results on March 28 before the bell. Analysts believe that in-line earnings could push up the stock. Many analysts, including Mark Sue of RBC Capital Markets, have upgraded the stock ahead of the earnings announcement. It all suggests that the sentiment is positive around the stock.
BlackBerry CEO is putting the balance sheet in order
Since taking over as its CEO, John Chen has started the company’s transition from a smartphone seller to a provider of secure enterprise software and services. He ousted many senior executives and struck a deal with Foxconn Technology Co., Ltd. to outsource handset design and manufacturing. And now he is focused on putting BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s financial house in order.
Mangrove Partners had its worst month for shorts ever
Nathaniel August's Mangrove Partners was down 0.5% in May and 6.8% in April, bringing its quarter-to-date return for the second quarter to -7.2% and its year-to-date return for the first five months of the year to -35%. At the end of May, the fund's gross exposure was 194%, while its net exposure was 7%. Q2 Read More
The Waterloo-based company has sold most of its Canadian and U.S. real estate holdings. RBC Capital Markets analyst Mark Sue says that liquidity is not a near-term risk for the company. BlackBerry is expected to receive about $500 million in tax refunds this quarter, and another $300 million to $400 million from real estate sales. The company already has a cash balance of about $2.2 billion.
Why BlackBerry may go up in the near-term
However, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s sales are expected to decline at least 35% annually over the next two years. And the company is unlikely to become profitable before 2016. Kevin Kersten of InvestorsObserver says that adding a new position to the stock doesn’t make sense. The stock currently trades at around $9.55, and the June 2014 9 call has a bid of 1.42. It suggests that a covered call has 14.9% downside protection, and a 10.7% assigned return rate, which converts into a 43% annual return between today and June expiration. That’s a good reason to hold on to the stock for a few more months.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s long-term prospects aren’t positive, but it’s still a major player in the smartphone market. If you invested in the stock a few years ago, selling now wouldn’t give you much money. But the consistent analyst upgrades and rising optimism around the stock should push it up in the near-term. That’s why Kevin Kersten says that holding on to the stock, at least for now, makes more sense.
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares jumped 1.65% to $9.52 at 10:18 AM EDT on Tuesday.