BlackBerry's (NASDAQ:BBRY) stock jumped 14% during market hours and an additional 1% in after hours trading yesterday, March 11 2013. Massive trading volumes have been surrounding the stock since the year began, as investors speculate on whether the latest BB10 line of phones will bring back the troubled phone maker. Days like yesterday have come around a multitude of times, with the stock posting a huge gain or loss in a very short time span. We must investigate the news that could have pushed the surge to see whether the stock will retain its value.
The flagship phone of the new BB10 line will finally arrive at stores in the United States next week. Although BlackBerry 10 has debuted internationally, the US has stricter phone tests than many other parts of the world. Since BlackBerry gave US carriers the Z10 around the same time as they gave it to their international customers, we will only be seeing the phones in major stores starting next week.
BlackBerry selected $200 as the price point for its phone in the US. This price will only be given with a 2-year contract, of course. This puts the Z10 at exactly the same contract price as its two biggest competitors: the iPhone 5 and the Galaxy S3. The Z10 has hardware of a similar caliber to the two other phones, but what it lacks is market share. The Z10 is a high-end product, however, and is being priced accordingly.
BlackBerry's entrance into one of the largest telecom markets in the world is a good reason for the stock to go up. BlackBerry will be competing in the luxury smartphone space with several other big names, but has created a competitive product and should be able to generate sales. Recent data from BlackBerry has shown that 1/3 of their sales in Canada have been from people formerly using iOS or Android. If BlackBerry can generate that kind of consumer interest in the US, it will be profitable.
Lenovo Group's (OTCPK:LNVGY) CEO Yang Yuanqing has informed a French newspaper that he may potentially buy BlackBerry for his firm. Although there have been no formal declarations, Yuanqing has mentioned purchasing the embattled phone maker before. Investors may think that there is substance to these announcements, which there may just be, and have bought the stock in anticipation.
Upcoming Short Squeeze
There is no denying it: many investors have shorted BlackBerry. The stock is highly polarizing, and for every investor that thinks BB10 will succeed there is another who thinks it will fail. Looking at the short interest data, you can see that a lot of people have to cover their shorts within the next week. This will drive the stock price up as demand skyrockets. Investors anticipating the squeeze could have purchased the stock to profit off of it.
BlackBerry's stock had a lot of good reasons to jump 15%. Evidently people are optimistic about the US release of BB10. The optimistic investor sentiment may be indicative of good consumer sentiment, and the competitively priced Z10 should start grabbing market share as soon as it hits AT&T stores in 10 days. The stock should experience some more drastic swings in value, but current sentiment seems to be pushing it upwards. BlackBerry is a good short-term buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.