BlackBerry Could Double From Here

 |  About: BlackBerry Ltd. (BBRY)
by: Chris Lau

The banter around BlackBerry's (NASDAQ:BBRY) future continued to be largely negative. The Wall Street Journal that BlackBerry would reduce its headcount by a massive 40% by year-end. Since shares barely budged on the day (by dropping only 1.42%), it suggests a support level on its stock price is forming.

Two more positive developments by BlackBerry support a view that shares bottomed from here. The 5-inch Z30 device is finally being released next week, and BlackBerry Messenger ("BBM") available on Google's (NASDAQ:GOOG) Android and Apple's (NASDAQ:AAPL) iOS devices on September 21 and 22, respectively. Extreme negative coverage on BlackBerry might even be setting up an entry point for investors, ahead of quarterly earnings. BlackBerry could report another loss on September 27, 2013, but even a miniscule improvement in operations would push shares higher. BlackBerry could double from here.

Bearishness is Excessive

Short interest declined 2.4% between August 15 and August 30, 2013, but continues to at a stubbornly high short float of 30.2%.

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Short Interest

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Investors need only look at shares of Tesla Motors (NASDAQ:TSLA) stock or ExOne (NASDAQ:XONE) as examples of bears making a wrong bet, and getting caught up in a short squeeze. Although these companies are in the growth phase of their product cycle, and BlackBerry is not, bears are still betting that BlackBerry will not find a buyer.

Given that Thorsten Heins, the CEO, would be rewarded US $55.6 million if the company is sold and he is ousted, a sale of the company should be viewed as very likely.

Apps Ecosystem Growing

The App ecosystem is improving. BlackBerry is giving away up to $25 in premium apps to its BlackBerry 10 users, in a move to reward its loyal customers. Evernote released a native app that integrates with the built-in Remember App.

When OS 10.2 is released, the support for cross-platform apps will improve further that most investors realize. The Android 4.2.2 runtime, or "Jelly Bean," will be supported. The system is expected to be released by mid-October. BlackBerry shares may well sell-off on September 27, 2013, but astute investors will recognize that the company's cross-Android support strategy will be on schedule as BB 10 devices are shipped worldwide.

By allowing Android developers to port their apps to BB10, these developers gain millions of potential customers.

Z30 Sales could Surprise

BlackBerry raised the processor speed for the Z30 by including a dual-core 1.7GHz Snapdragon S4 Pro made by Qualcomm (NASDAQ:QCOM). The battery is 2,880mAh and will permit users mixed use of up to 25 hours. The BB 10.2 operating system will be included on the Z30. Unique features should help this device stand out from the competition. These features are largely messaging-related. For examples, messaging preview on a lock screen and BBM message replying regardless of what app the user is on are supported. A video illustrating the features may be accessed here.


BlackBerry trades at a price to sales ratio of 0.47, less than half that of Nokia. Nokia (NYSE:NOK) is now up 68% since selling its handset division to Microsoft (NASDAQ:MSFT). If the future buyer valued the company similar to that of Nokia's price/sales, BlackBerry would be worth double its current price.






















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Source: Seeking Alpha

BBRY Chart
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BBRY data by YCharts

Buy Now, or Wait

Most investors expect BlackBerry to report an ugly quarter, since shares did not hold above the $11 level after privatization efforts were announced. Shares could dip again, but BlackBerry is making good progress in transitioning to BB10. Every effort will be made to maximize shareholder value through the sale of the company. In the interim, strong demand for BBM on other platforms and better demand for the Z30 device should be evidence to future buyers that the company is worth more than what it is trading at right now.

Disclosure: I am long BBRY. 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.