On September 24, 2012, the then Research in Motion stock ultimately collapsed to a nine-year low at $6.22, before rebounding sharply and closing out the June 21, 2013, trading session at $13.78. During the first calendar quarter of 2013, Research in Motion ultimately changed its name to BlackBerry (BBRY) and brought its latest BlackBerry 10 operating system platform to market. Over the past year, reviews and sales estimates concerning the BlackBerry 10 platform may be described as mixed, at best. According to the downbeat Louis Bedigian and Forbes Magazine, the BlackBerry 10 launch was destined to degenerate into an "enormous, record-breaking flop." Shareholders, of course, always vote with their feet and have effectively dismissed Mr. Bedigian and his warnings. Short sellers, especially, are setting themselves up to be thoroughly routed in the near term.
BlackBerry Short Interest
Traders initiate short positions after first borrowing shares of stock from other investors and immediately selling these shares for cash. At a later date, investors will re-enter the market and buy to cover shares of stock to replace the original stock loan. Short sellers therefore turn profits when share prices actually decline. A short position, of course, is always a risky proposition as share prices theoretically range between zero and infinity. A squeeze occurs when short sellers panic and buy to cover stock to close out outstanding positions. This frantic buying activity effectively accelerates share price gains. Recent volatility in BlackBerry stock may serve as evidence that this company remains a direct target for aggressive short sellers.
According to Yahoo Finance, traders sold 171 million BlackBerry shares short out of 515 million total shares outstanding, as of May 31, 2013. BlackBerry executives manage a business that carries $7 billion in market capitalization over top of only 485 million shares in float. Over the past 90 days, BlackBerry stock is averaging roughly 30 million shares in daily trading volume. By statistics alone, BlackBerry investors should prepare for extreme volatility - due to relatively large short trading positions juxtaposed against minimal share float. On June 28, BlackBerry will release results for the first quarterly period of fiscal 2014. A BlackBerry earnings surprise may serve as the catalyst for a short squeeze event through the beginning of next month.
BlackBerry 10 Specifications
To date, the BlackBerry 10 platform effectively branches off into two individual handsets - in the Z10 and the Q10. The Z10 is a touchscreen phone notable for its vertical profile, metallic finish, and rounded edges. As such, the Z10 directly competes against premium Nokia (NOK) Lumia 920, Samsung Galaxy S4, and Apple (AAPL) iPhone 5. Alternatively, the Q10 is notable for its QWERTY keyboard, which is a staple of the BlackBerry brand. AT&T (T) began taking pre-orders for the Z10 on March 22, while the Q10 was recently made available for U.S. retail consumption earlier this month, on June 6. For real growth, of course, the American market is all-important.
BlackBerry loyalists, who include J.P. Mangalindan of Fortune Magazine, prefer a fully functional keyboard for sorting through emails and navigating Web 2.0 Internet browsing status updates. Rather than compete against Apple and Google (GOOG) for hipster dollars, BlackBerry will market its Q10 smartphone as a tool to best serve the needs of its traditional technocrat base. Political bureaucrats, IT directors, and corporate professionals generally gravitate toward the BlackBerry brand for its security features and networking tools. Again, BlackBerry stock is primed for a short squeeze going forward, especially if the looming Q1 2014 report is any better than a financial disaster and unquestionably weak Z10 sales.
On June 4, 2013, research firm comScore released its latest report - for April 2013 U.S. smartphone subscriber market share. This report averages data for the three-month period beginning in January 2013, and running through April 2013. The smartphone market is still effectively a duopoly - with Google Android and Apple iOS operating systems powering a combined 91% market share of all smartphone subscriptions. At the bottom of the heap, BlackBerry and Microsoft (MSFT) - Windows are left to scrap over the remaining meager 8% share of this market. BlackBerry shareholders will celebrate, of course, if the BlackBerry 10 operating system emerges as a real and viable third wheel to the Google Android - Apple iOS duopoly. For now, speculators are primed to trade off the looming quarterly earnings event for quick profits. This action will feed upon itself - through the ensuing short squeeze.
The Bottom Line
Societe Generale analyst Andy Perkins estimates that BlackBerry will tally 3.7 billion in total revenue for Q1 2014. According to Perkins, this top line figure will break down to $31 million, or six-cents per share, in quarterly profits. For the past year ended, March 2, 2013, BlackBerry reported a $646 million loss. Traders will seize upon any glimmer of hope - to power this stock ahead and above technical resistance at $16 into the month of July.
Do not short BlackBerry stock.