Q10 Will Be The Catalyst For The BlackBerry Short Squeeze

| About: BlackBerry Ltd. (BBRY)

The upcoming Q10 release of the New Qwerty BlackBerry smart phone will be the catalyst for the anticipated short squeeze in BlackBerry (NASDAQ:BBRY) stock.

Ask any BlackBerry loyalist why they like their phone, and the answer's always the same: it's the keyboard. The physical keyboard is the reason why we all have used and stayed loyal to the BlackBerry brand for years. Even the competition, Google (NASDAQ:GOOG) executive chairman Eric Schmidt, says it's the physical keys that draw him to the Canadian brand.

The launch of the Q10 will trigger a cascade of action which will lead to substantial increased sales and profits for BlackBerry.

The Q10 will launch in the UK on April 26th, Canada May 1st, and in the US by the end of May. This will mean that UK and Canadian sales will contribute one month to the current quarter, and US, UK, and Canada will contribute fully to the 2nd quarter sales. This means that the squeeze may take some time to take effect.

How many times have you heard loyal BlackBerry users say, the Z10 looks great but they still want to wait for the Q10, and then compare before they make a choice. I am one of these, and so are many of my colleagues.

I have used the Z10 and do find it's touch keyboard to be much easier to use than the Apple (NASDAQ:AAPL) iPhone 5 that my daughter uses. Especially with the Z10 word suggest function letting me avoid typing complete words that my fat fingers have trouble with.

Recently the website N4BB did a typing comparison between the Q10 and the Z10 for speed and found that despite the great design of the Z10 keyboard with word suggest functions typing on the Q10 was still faster. I would hazard to guess that most traditional BlackBerry users are waiting to have the choice in models.

Initial sales figures for the Z10 show that as much as 55% of adaptors are non BlackBerry users from Apple, Samsung (OTC:SSNLF), Nokia (NYSE:NOK) etc.... This makes sense as the Z10 is actually targeted to a non-traditional market for BlackBerry, the touch screen smart phone market.

So what will happen when the Q10 hits the market?

All of the traditional users of BlackBerry will be able to compare the Z10 to the Q10 and will be able to buy their BlackBerry of choice. This will trigger a triple play of buying activity.

  1. Anyone waiting to compare can now make the choice, and buy the handset of choice.
  2. There will be an uptick of Z10 sales as many who have waited will decide that they like the touch keyboard, larger screen and go ahead with a purchase.
  3. Q10 sales will explode as all who have been waiting can get the Qwerty smart phone with the modern BB10 operating system for the first time.

Now most of these benefits will happen in the Second Quarter (as I mentioned above), so it will be important to hold the fort through the noise that will be bound to be created by the short crowd.

I would expect that we will be reading many negative reviews, tales of low inventory, low sales, returns, low number of apps, and i am sure some new ideas that the short crowd will come up with to try and drive the stock price down. We may even see more legal action from BlackBerry if things get to down and dirty.

Another benefit that the release of the Q10 will trigger is in the BlackBerry Enterprise Server - BES market. Now that large corporations have a full range of options from BlackBerry as well as other BYOD options this will allow them to move forward on implementation of BES 10. Just last week Canadian Tire one of Canada's largest retail chains standardized on BB10 for their entire work force.

What is a short squeeze?

For those who do not know this is when a stock that is highly shorted like BlackBerry is with over 30% of the float of available shares garnering short interest, starts to rise and reaches an inflection point where the shorts start to cover in mass and trigger a demand for the stock that outstrips available stock and the price then rises quickly.

This happened recently with Volkswagen, and First Solar. These short squeezes resulted in a one day rise in Volkswagen (OTCPK:VLKAY) of 82%, and a rise in First Solar (NASDAQ:FSLR) of 72% over a 3 month period. Both were highly shorted as is BlackBerry today.

So the question is when will the short squeeze come?

If I had a crystal ball I would tell you an exact date, and anyone who does you should seriously question their credibility. I have not proven good at predicting the future and I am sure most of you fall into the same boat.

On the short side it may depend on when those stock were shorted. If Hedgefund A had shorted in 2011 @ 60 they might still remain patient and buy back on dips. However if Hedgefund B had shorted @ 6 in November they will have their fingers on the trigger.

Timing could also be affected by big news, a major purchase, government contract, sell outs, etc.. and we have no idea when those will come.

Conversely if the launch of the Q10 is a flop, interest is low, and subsequent sales and profits poor then the shorts will be rewarded. I do not believe this will happen, however it would be prudent not to bet the farm in any case as you would with any position you take.

My opinion is that the short squeeze will hit some time between now and the reporting of 2nd quarter earnings at the end of September, as 2nd quarter will be the first full quarter that Q10 will affect. Sometime in between all hell will break loose and I have chosen to be on the long side when that happens.

Stay long, stay strong, stay patient, and we should be rewarded nicely!

Disclosure: I am long BBRY, AAPL, FSLR, GOOG. 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.

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