Sell BlackBerry Ahead of Earnings

Shares of beleaguered smartphone giant BlackBerry (NASDAQ: BBRY  )  have sunk lower after the having reached a 52-week high of $18.32 on Jan. 24. The stock is down more than 20% over the past two months. However, shares are still up 140% since reaching bottom at $6.22 last September. Investors are wondering what's next. But that's where things get complicated.

"Pretty good" is not as good as "Wow!"
BlackBerry faced an uphill battle. The company needed to remove the negative stigma that's been associated with its name. The company, formerly known as Research In Motion, had become the "new Palm," the once-dominant smartphone manufacturer that was killed off by BlackBerry.

Today, however, it is BlackBerry that's suffering the same morbid fate as Palm. This time, it's at the hands of Apple (NASDAQ: AAPL  ) and Samsung. Remarkably, even Microsoft's Windows Phone has surpassed BlackBerry. However, BlackBerry had an ace called BB10, the new platform that was going to revolutionize the company. Investors bought into the idea. After numerous product delays, on Jan. 30, the company finally unveiled the phone. Unfortunately, the bar was set too high. The reception was underwhelming. The Street expected "Wow!" The company, however, delivered "pretty good."

This was unacceptable, especially for BlackBerry, which had the impossible task of coming back from the dead. The launch fell short of the "Lazarus" quality that the Street expected. The phone, while pretty good, offered no new mobile experience. And the stock got punished for it -- falling as much as 25% the following day.

Who are we kidding here?
Current BlackBerry users were impressed. But that's not saying much. BlackBerry did not present anything that would cause a non-BlackBerry user to switch from Apple or Samsung. This point was very evident last week when the phones when on sale in the U.S. for the first time. The so-called "buzz," long lines, tents, overnight sleeping bags -- things that have become standard with product launches from Apple and Samsung -- were nowhere to be seen for BlackBerry.

Granted, this is not a predictor of success. And BlackBerry enthusiasts will argue that this "buzz" is not needed. I don't buy it. Neither does the Street. The company has sold investors on the idea that the new phones and platform can revive its fight against Apple and Google. But investors yawned. BlackBerry bulls are now suggesting that whether or not the company is able to steal market share from Apple or Samsung does not matter. Then what's the point, especially after the company has waged its entire future on BB10?

BlackBerry can't survive solely on the support of its existing users. The company's ability to attract new customers away from competing devices is how BlackBerry will be judged. And the Street doesn't feel confident that the new phonecan do that, which explains the 17% sell-off last week once the device finally hit the stores. Unfortunately, the sell-off may not be over.

A new name, new era -- what to expect?
The company begins a new era under its new name and ticker when BlackBerry announces its fiscal fourth-quarter earnings results this Thursday for the period ending March 2. No one knows what to expect.

Estimates are all over the map. The Street has had a hard time pinning down sales figures for BlackBerry's Z10 phones, which launched globally earlier in the quarter. For instance, Wells Fargo expects the company to report a loss of $0.23 per share on revenue of $2.99 billion. Raymond James sees a loss of $0.17 on $3 billion in revenue.

As far as devices sales are concerned for the Z10, the figures range from 500,000 units from Sterne Agee to 1 million projected by BMO Capital. There is no real consensus. This may or may not matter, however. The company is coming off a decent third quarter -- reporting a net loss of $0.22 per share on revenue of $2.7 billion, which beat on both top and bottom line estimates.

Meanwhile, the underwhelming phone launch notwithstanding, investors should feel encouraged that management has made considerable operational improvements. BlackBerry has been growing cash at an impressive rate, including amassing close to $2.7 billion in the third quarter, with zero debt. Unfortunately, this does not address the lack of consumer appeal. And investors should be prepared for what the company will reveal about the success of its new flagship product.

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Read/Post Comments (16) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 27, 2013, at 6:41 PM, PurpleBlue wrote:

    Interesting that your down on the companies chances but are posting two of the most optimistic forecasts. Presenting a balanced view was never your intention.

  • Report this Comment On March 27, 2013, at 6:42 PM, TimKnows wrote:

    Yet other useless analysis, thanks for wasting our time again.

  • Report this Comment On March 27, 2013, at 6:46 PM, Alext1379 wrote:

    Since when has Samsung ever had a lineup for anything? Wait a week af chances are Samsung wil he giving their phones away for $0. Even Apple lineups are becoming so 2007.

    I'd be surprised if the shorts didnt pre-empt the quarterly by selling to see if thu can cause a panic before people finish digesting the better than expected numbers.

  • Report this Comment On March 27, 2013, at 6:54 PM, ecaffeine wrote:

    Could you please explain how anyone can sell ahead of earnings now when they report before the open?

    Thanks.

  • Report this Comment On March 27, 2013, at 6:56 PM, Sprainedmule wrote:

    What a lame article on Blackberry ! Trying to scare people into selling ? You are a shorter for sure. You will lose money for sure on that. Again, "Lame Report"!!

  • Report this Comment On March 27, 2013, at 7:08 PM, hedgeshorthater wrote:

    It makes me very happy that you are going to get burned badly tomorrow.

    This is going to be a short squeeze for the ages.

  • Report this Comment On March 27, 2013, at 7:12 PM, Alext1379 wrote:

    Here's some numbers. If the Gulf region can sell 300k units, and BB can get 1% of the Canadian market to get Z10s (apparently our phone market is 20 million units), then that's 500k. I'm sure the UK can match Canada so there's your 800k units from not even a full quarter.

  • Report this Comment On March 27, 2013, at 7:27 PM, dogmatica wrote:

    Hi,

    Hey, ecaffeine, I was going to explain to you that you simply "sell" by the day before earnings. However, this article came out 45 minutes ago, and so it's going to be awfully hard to sell since the market's closed. Astute, and good point!

  • Report this Comment On March 27, 2013, at 7:46 PM, NotAfoolHere wrote:

    Another Motley Fool BS story

    What do want people to do, sell BBRY and buy Apple

    Good day for apple investors today, would have lost big.

    Another stupid MF article.

  • Report this Comment On March 27, 2013, at 8:11 PM, greenember wrote:

    To expect line ups for a single carrier launch of a phone from a manufacturer with ~2% US market share shows just how stupid analysts are. Add in that it launched at Best Buy in NYC at midnight and it's not surprising AT ALL that anyone who wanted one bad enough to wait in line was not going to wait until 8AM for the AT&T store to open. Add in that it was launched on a weekday when BlackBerry users are AT WORK trying to earn enough money to pay unemployment and welfare checks to people buying iPhones. Add in that it's March Madness and you need crowbars to pry people away from televisions. Add in that people who really wanted the phone could pre-order and have it delivered. Add in that businesses don't send their IT guy down to the store to buy phones, they go though telesales or the website.

    Now that you've added it up, what's the total? 2/3 of the float is happy and 1/3 of the float is screwed...

  • Report this Comment On March 27, 2013, at 8:36 PM, hedgeshorthater wrote:

    Infothathelps was fired by BlackBerry in 2010.

    Not someone to listen to

  • Report this Comment On March 27, 2013, at 8:42 PM, Sprainedmule wrote:

    Greenember! Thanks for a good post. Damn right!

  • Report this Comment On March 27, 2013, at 9:29 PM, magnaman1969 wrote:

    First of all..MsFT isn't ahead of Blackberry. Blackberry still owns 3rd place.

    Who stands in line for a phone besides itards?

    Phone is awsome and BlackBerry is here to stay. Get used to that fact MF.

    Comeback Kid...book it!

  • Report this Comment On March 27, 2013, at 11:07 PM, speechisntfree wrote:

    Honestly, I don't even read the articles anymore. I come straight to the comments because they always make me laugh.

  • Report this Comment On March 28, 2013, at 12:12 AM, jdfarm wrote:

    You may be right but this article reminds me of one written several years ago about Deckers. I bought at a little over $21 and it fell to $17.50 or so then one of you writers said sell because it wasn't going to do anything. Well, dumb me, I sold and then watched it go to around $170,00 or so.

  • Report this Comment On March 28, 2013, at 1:40 PM, ads29 wrote:

    This is a bias'd article, as you can see the author owns shares of APPLE, thus trying to make BBRY look poor so AAPL shares rise.

    Way to ruin your own name MF, I will never trust another article you post.

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