It was a busy week in BlackBerry (BBRY) land. Shares of BBRY were whipsawed all week as bulls and bear waged a battle of rhetoric.
The shares rose on Monday after our latest report concluded that the stock should double to $30 within the year.
The shares dove on Tuesday after an analyst slashed his BB10 build plan estimates. Unbeknownst to most, those "estimates" were (and still are) unrealistically high, allowing this bearish analyst to lower his estimates at will. Be careful about who you trust out there folks!
On Thursday, the shares rallied on rumors that Carl Icahn may soon file a 13D revealing a large position in BlackBerry. The rumor mill was also mulling a possible takeover by a strategic partner. IBM (IBM) was cited. Neither of these rumors would surprise us, but again, be careful who you listen to. There's a lot of money to be made in manipulating stocks via unsubstantiated rumors.
The key is to stay focused on two things:
- Our extensive and proprietary research shows that consumer interest in the Q-10 is extraordinarily high. This is because the Q-10 will be the first BlackBerry to combine a modern operating system (BB10) with BlackBerry's iconic QWERTY keyboard.
To be clear, we expect the touchscreen-based Z-10 to fizzle out. We also expect carriers to be skeptical of the Q-10 at launch.
However, we expect that strong demand from BBRY's 76M customers will cause widespread stock-outs, forcing reorders and greater carrier support. Indeed, this has already happened with the Q-10's launch in the U.K. and Canada.
The Bottom Line - The BBRY customer base consists of mature business-minded consumers who are set in their ways. They don't want to move away from BlackBerry or their QWERTY keyboards. If just a third of these customers upgrade to BBRY's new lineup, we believe the stock will double to $30. FYI, in the smartphone market, more than half of the typical vendors' customer base upgrades every year. The BBRY base is in a state of pent-up demand, so upgrade uptake could far-exceed 50%.
- IT giants like Microsoft (MSFT) and IBM have virtually no presence in the smartphone game. Having covered both since the early 90s, I know that's unacceptable to both. With Apple (AAPL) and Google (GOOG)/Samsung (GM:SSNLF) out of reach, BBRY represents the next best opportunity to gain critical mass with an operating system and hardware platform.
With the advent of smartphone OS virtualization, a BlackBerry can be outfitted with multiple OSs, enabling a company like MSFT to gradually transition the BBRY base to the Windows OS without forcing these faithful customers to give up the device they know and love.
Conclusions: The BBRY story is all about customer demand for the Q-10 and the company's prospects for being acquired. Don't let anything else sway you. In the meantime, we can expect positive news flow from BBRY in the coming days, as it hosts its annual BlackBerry Live event in Orlando, FL from Monday through Wednesday. We'll be in attendance.
Remember, there is always a flood of data points available in the market - but in almost every case, only two or three really matter. In this case, it's all about how BBRY navigates the next 12-months. If its massive customer base adopts the Q-10, shareholders will benefit greatly. After that, all bets are off. Until then, our confidence in BlackBerry's near-term outlook is why it retains its place in our Stocks To Triple portfolio.