The BlackBerry Stock Rally Is Real -- Should You Buy?

BlackBerry (NASDAQ: BBRY  ) stock is up more than 50% year to date, making it one of the best stocks to own in 2014. Can the rally continue? Guest host Alison Southwick put these questions to Fool analysts Nathan Alderman and Tim Beyers in this week's episode of 1-Up on Wall Street, The Motley Fool's Web show in which we talk about the big-money names behind your favorite technology, movies, toys, video games, comics, and more.

BBRY Chart

BBRY data by YCharts

Tim says CEO John Chen deserves credit for making moves to take advantage of BlackBerry's strong positioning in fields where security is at a premium. Health care, for example. In April, the company announced an investment in NantHealth for creating what amounts to a custom smartphone for use in hospitals. Doctors could benefit if BlackBerry and NantHealth provide a better platform for secure, on-the-go viewing of CT scans and other 3-D images.

Even so, the underlying business hasn't changed much. Revenue continues to slide, returns on capital are in the red, and profits remain elusive. A full turnaround could take years, if it ever comes, especially if Chen continues to pour significant resources into battling Apple and Google for a bigger share of the North American smartphone market.

The new BlackBerry Passport. Credit: BlackBerry.

Nathan says BlackBerry stock was all but left for dead. That there are now signs of life means only that the company has defied lowered expectations. Winning back customers who've since left for Apple or Google is another matter entirely, though the new Passport smart device could help by reminding users of designs that first helped BlackBerry emerge as a leader in digital communications.

In the end, Tim and Nathan agree that investors shouldn't buy BlackBerry stock just on the promises afforded by health care and the new Passport. But it's also nice to see Chen moving the company in the right direction.

Now it's your turn to weigh in. How do you rate BlackBerry stock right now? Click the video to watch Alison put Nathan and Tim on the spot, and then leave your take in the comments box below. You can also follow us on Twitter for more segments and regular geek news updates!

Warren Buffett's biggest cash cow ... disrupted like BlackBerry?
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted that this emerging technology is threatening one of his prized holdings. While Buffett shakes in his billionaire boots, only a few investors are embracing this new market, which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping on to one company that could get you the biggest piece of the action. Click here to access a free investor alert on the company we're calling the brains behind the technology.


Read/Post Comments (8) | Recommend This Article (4)

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 July 13, 2014, at 10:17 AM, ronbeasley wrote:

    A superficial review with a total lack of understanding of the value of the company's assets and Chen's effectiveness at optimizing those values while pruning costs. Just about what I'd expect from bloggers trying to sell subscriptions to a second rate newsletter service.

  • Report this Comment On July 13, 2014, at 10:25 AM, nairb1963 wrote:

    Couldn't agree more with Ronbeasley post, company has 3+ billion in cash , close to 1 billion per Q in rev, and you have writers rating stocks. Not even good writers just writers.

  • Report this Comment On July 13, 2014, at 11:31 AM, TMFMileHigh wrote:

    Hi Ron and @nairb1963,

    >>a total lack of understanding of the value of the company's assets ...

    Sorry, but I don't buy it. Let's do quick compare:

    * Yes, there is close to $3 billion in cash and short-term investments. There's also $1.3 billion in debt on the books. The enterprise value of the ongoing operation is about $4.6 billion, or $92 for every one of BlackBerry's claimed 50 million smartphone users.

    * Now compare that to Apple. Estimates I've seen place the iPhone installed base at about 300 million. We also know that the iPhone tends to account for between 50% and 55% of total revenue. Thus, it's probably fair to say half of Apple's enterprise value, or $275 billion, is related to its iPhone business -- or roughly $917 per installed user.

    Is Apple's iPhone business worth 10 times as much as BlackBerry's? At one point, I'd have said absolutely. Chen's good work is closing the gap, I think, but I'm also not willing to presume that he'll extract enough value to continue to crush the market from here. Rather, I'd like to see at least a couple of quarters of positive (and expanding!) returns on capital. Something that proves Chen is the good steward he appears to be.

    >> ... a second rate newsletter service.

    Your opinion is yours and you're entitled to it, of course. But I think it's fair to point out that Hulbert -- the service that tracks real newsletter performance -- finds that TMF picks are doing quite well (WSJ subscription required):

    http://online.wsj.com/news/articles/SB1000142412788732399700...

    Foolish best,

    Tim

    --

    TMFMileHigh in CAPS and on the boards

    @milehighfool on Twitter

    http://about.me/timbeyers

    http://timbeyers.me

  • Report this Comment On July 13, 2014, at 3:29 PM, Chippy55 wrote:

    I started buying Research in Motion at $6.59 a few years back and had a double within 2 months, then realized that day traders and Apple fanboys were using RIMM/BBRY as a piggybank/pinata/trading vehicle with the stock getting whipsawed amid rumor, rhetoric and it became hard to distinguish fact from outright lies (Detwiler Fenton - a stock selling for 10 cents - comes to mind). I like Thorsten Heins' webcasts, he seemed like a no-nonsense straight shooter, no hemming and hawing, no stuttering, it's like he was reading from a teleprompter. Anyway that's all history and I'm equally impressed with Mr. Chen, I didn't agree at first with BBRY's decision to have Foxcon build all the handsets but now his vision is coming more into focus. I wrote a note on my calendar in the kitchen (I'm watching the World Cup or I'd go look it up) wherein he said he'd need either 5 or 6 quarters to turn things around, and he made that statement a few months ago. I can wait.

  • Report this Comment On July 13, 2014, at 10:24 PM, DZPM wrote:

    Blab... blab...blab... BBRY is still losing billions of dollars

    BBRY debt to total capital ratio, at 26.73%, Supstancional increase over the last year.

    With stiff competition stock market over do correction (Crash) and interest rate rising BBRY is on the road to under $5.00 Regular investor beaver don’t fall into the scammers spell.

    Jefferson Research - Accuracy 78 % > Sell

    EVA Dimensions > Underperform-Accuracy 64 % > Sell

    Ford Equity Research-Accuracy 63 % > Sell

    BBRY Equity Summary Score Very Bearish

  • Report this Comment On July 14, 2014, at 4:16 PM, Sotograndeman wrote:

    Agree totally with ronbeasley. To call the article "superficial" is generous. The authors should listen carefully to John Chen's investor presentation and understand the 4 pillars of the new BB.

    Likewise, Milehigh, BB does NOT compete with Apple. You should also listen to Chen. You're missing most of the picture.

    Chen has promised (and reaffirmed) cashflow breakeven by Feb 2015, and profitability in the following 12 months. BB has a rock solid balance sheet. It remains significantly undervalued.

    Milehigh, yes you can wait in the warmth of the herd until Chen's promises become reality, but by that time the stock price will be way higher.

    "I'll tell you how to get rich. Be greedy only when others are fearful, and fearful when others are greedy." Buffett

    PS Your Fool Canada colleagues have a much better grasp of BB than you guys do. I suggest you read what they write.

  • Report this Comment On July 15, 2014, at 9:25 AM, TMFMileHigh wrote:

    @Sotograndeman,

    >>Likewise, Milehigh, BB does NOT compete with Apple.

    Much as I hope you're right about a rally in BlackBerry stock, wishful thinking doesn't count as an advantage.

    So long as there are real customers choosing between a BlackBerry or iPhone, then there is competition between these two. Chen's acknowledgment of this truth isn't required.

    Foolish best,

    Tim

    --

    TMFMileHigh in CAPS and on the boards

    @milehighfool on Twitter

    http://about.me/timbeyers

    http://timbeyers.me

  • Report this Comment On July 15, 2014, at 3:10 PM, Sotograndeman wrote:

    Milehigh -- your comments simply confirm your lack of understanding of what BB has become today. Typical herd groupthink from the past. Yes, Chen's transcripts are a must for you.

    Back to ronbeasley's post, the Fool is doing itself a grave disservice with simplistic and ill-informed articles of this kind fronting a newsletter. A serious piece (short is fine) demonstrating knowledge and insight would be so much more convincing to discerning investors. But that takes work and time and thought.

    Goodbye, good luck.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3026838, ~/Articles/ArticleHandler.aspx, 9/19/2014 7:54:53 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement