Blackberry Stock Up 5% – Time to Buy BB Stock?

The price of Blackberry stock jumped almost 5% yesterday during a high-volume trading session following an upgrade from Canaccord Genuity, with the stock being moved from Sell to Hold by the financial services firm amid the business’s appealing growth prospects.

Canaccord’s analyst Michael Walkley stated that he believes that the company is “well-positioned to accelerate given Blackberry’s differentiated AI-driven data lake approach driving proactive prevention”.

The analyst reiterated his price target of $10 for the stock upon meeting with the management team of the Canadian former manufacturer of smartphones while he is projecting revenues of $774 million and $1.02 billion for Blackberry in 2022 and 2023 respectively along with an adjusted negative EPS of 18 cents for 2022 and positive EPS of 15 cents for 2023.

Only a few days ago, Blackberry announced that it will be developing a solution for vehicle-based payments in partnership with the California-based fintech Car IQ. The company estimates that the market for these kinds of payments should be worth around €530 billion ($622.8 billion) by 2030.

Could these positive news serve as a catalyst for further upside for Blackberry stock? In the following article, I’ll take a look at multiple relevant factors that could influence the price of BB to outline plausible scenarios for the stock as we move forward into the second semester.

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Blackberry Stock – Technical Analysis

Since Blackberry stock is considered a meme stock, any assessment of the technical action must be accompanied by an assessment of the ticker’s sentiment among retail traders along with its short float as these two variables could have a tremendous effect on the price if the stock becomes a target of the Reddit army once again.

At the moment this is written, comment volume about Blackberry on the popular Reddit messaging board WallStreetBets is quite low and it has remained below the 2% mark in the past 30 days according to data from meme stock tracker Swaggy Stocks.

However, the stock’s short float remains high as it is standing at 8.4% according to data from Finviz. This percentage represents a total of approximately 47 million shares currently being borrowed by short-sellers. Based on the stock’s 10-day average volume, it would take more than 7 trading sessions for short-sellers to fully cover their positions without significantly boosting the price of the issue.

Therefore, the possibility of another short squeeze like the ones that have happened in January and May this year remains on the table if the price suddenly surges. Based on a volume profile, it seems that the $12 level could be the threshold that could trigger that kind of move at the moment as trading volumes increased dramatically back in May once that mark was surpassed.

Aside from that possibility, the price of Blackberry shares has tagged its lower trend line – this being the third time that this area of support has contained the stock’s latest downturn.

Moving forward, if the price of Blackberry keeps surging, chances are that the stock might be getting ready for another strong bounce as this support area has acted as a launching pad in the past for the previous short squeezes.

Meanwhile, a move above the stock’s short-term moving averages may confirm a bullish outlook for BB stock.

Blackberry Stock – Fundamental Analysis

Blackberry’s sales have been on a downtrend for years as the company was forced to re-envision its business once it got rid of its smartphone unit back in 2016.

Since then, Blackberry has been working on the development of cybersecurity solutions for multiple industries and has innovated significantly in this industry by introducing AI-powered products and services that may start to gain some traction amid the latest rise in cybersecurity threats.

By the end of its 2021 fiscal year, the company produced revenues of $893 million resulting in a 14.2% drop compared to the $1.04 billion it brought the previous year while gross margins declined from 73.9% to 72%.

Moreover, the company’s EBITDA margin improved significantly compared to the previous year but was relatively unchanged compared to the 2019 fiscal year while Blackberry posted its third consecutive year of adjusted net losses, with its non-GAAP EPS landing at minus 11 cents.

Canaccord’s forecasts for Blackberry are on the optimistic end as they stand well above the consensus. If one uses this $1.02 billion sales estimate for 2023 as a plausible figure to value Blackberry, the company would be trading at 5.7 times its forecasted sales for that year – a metric that seems significantly stretched due to the poor historical performance of the company’s top-line results.

However, considering the strong portfolio of patents and intangible assets owned by the business – including its portfolio of top-line AI-powered cybersecurity solutions – and the up-and-coming nature of the cybersecurity industry, a price tag of $5.7 billion (enterprise value) for Blackberry seems particularly conservative.

This makes the company a potential takeover target and, in that particular scenario, long-term holders may stand to benefit if a stronger company decides to purchase the Canadian cybersecurity firm.

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