BlackBerry Ltd (BBRY): What’s Next?

BlackBerry Ltd (BBRY): What’s Next?
user1462590383 / Pixabay

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) had a disastrous year in 2013. The Canadian company’s stock plunged more than 40%, its key products failed to sell, and its weak management failed to turn the business around. Even worse, BlackBerry couldn’t even find a suitable buyer at one point. In its latest quarter, BlackBerry lost 67 cents a share with $1.2 billion in revenues, missing Wall Street consensus on both parameters.

Successful monetization of BBM crucial for BlackBerry

However, investor sentiment began to improve when BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) named John Chen as its new CEO. Shortkly after taking the helm, Chen signed a five-year deal with Taiwanese vendor Foxconn Technology Co., Ltd. (TPE:2354). The deal significantly reduced the supply chain risks for the Waterloo (Ontario)-based company. Foxconn plans to launch its first low-cost BlackBerry smartphone this April in Indonesia.

Carlson Capital Tells Investors: Twitter Still Has Tremendous Upside [Exclusive]

Black DiamondCarlson Capital's Double Black Diamond Fund returned 85 basis points net in August, bringing its year-to-date net return to 4.51%. According to a copy of the fund's September update, which ValueWalk has been able to review, its equity relative value and event-driven strategies outperformed during the month, contributing 131 basis points to overall P&L. Double Read More

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) CEO Chen aims to make the company profitable by 2016. That seems a bit unrealistic as analysts expect BlackBerry to lose $1.83 per share in FY2014 and $1.34 in FY2015. Though the company still has strong penetration in emerging Asian markets, those markets are now flooded with cheap Android phones. Furthermore, BlackBerry still has a long way to go to successfully monetize BBM.

Investors grew more optimistic about BBM after Facebook Inc (NASDAQ:FB) recently acquired WhatsApp for a whopping $19 billion. The social networking giant paid $42 per user to buy the mobile messaging service. That sent BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares soaring as much as 9% to $9.82 on February 19. But Bret Kenwell of The Street says that whatever valuation investors may attach to BBM, the messaging service by itself won’t be able to bring Blackberry back to profitability.

Shorting BlackBerry may prove risky

Going forward, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is unlikely to spin off BBM. The company will likely try to monetize the app on its own. Kenwell says he would be apprehensive about shorting the stock given the recent optimism. Overall investor sentiment is also much better than last year. The company will be reporting its fiscal fourth quarter results on March 28. Any takeover chatter or signs of sooner-than-expected profitability could also push up the stock.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares slipped 0.75% to $9.28 as of 12:59 PM EST on Friday.

No posts to display