In case you missed it, BlackBerry (BBRY) and Bluetooth have agreed to strengthen Bluetooth Smart Ready in BlackBerry 10. Developers can now incorporate Bluetooth Smart functionality in their BlackBerry applications. In doing so, BlackBerry is counteracting the bad publicity related to its last earnings report, when the company missed Wall Street's quarter one revenue estimates of $3.36 billion, reporting revenues of just $3.07 billion instead. Along with the Bluetooth project, BlackBerry recently introduced a new security solution that separates personal apps and data on iOS and Android devices. These initiatives should ease some of the negativity surrounding BlackBerry, as it had already lost 23% of its value in the previous year, while plunging 60% this July.
Shortcomings like this were almost unthinkable five years ago, when BlackBerry traded at almost $140 per share. At the time, the company was a leader in the smartphones sector. BlackBerry was successful in providing enterprise solutions to government agencies. It has since become apparent that competitors such as Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT) have taken its market. The new initiatives should give hope to investors looking to go long on BBRY. They will boost sales of the company's make-or-break new line of devices. Some hedge fund managers are already positive about the stock.
Hedge Fund Managers
In the present quarter, 43 managers are holding shares of BlackBerry in their portfolio. Of the 10 funds with the largest number of shares, four elected to expand their positions. Some of the bullish managers include Peter Rathjens, Bruce Clarke, John Campbell, John Thaler, Philippe Laffont, Douglas Dillard Jr., and Raj Venkatesan. In fact, Douglas Dillard and Raj Venkatesan's Standard Pacific Capital increased its position by 700%. It is possible that these institutional investors have seen something fundamentally attractive about the BBRY stock.
Delving into the fundamentals of the company, the price to book and price to sales ratios signal that BlackBerry is severely undervalued in comparison to all its competitors in the smartphones sector. BlackBerry's price to sales ratio is a meek 0.41. Investors are valuing the price to sales of Google (5.30), Apple (2.43), Nokia (NYSE:NOK) (0.43), and Microsoft (3.36) higher than BlackBerry. In addition, the price to book gives a similar conclusion. BlackBerry's price to book of 0.49 is below Nokia (1.56), Google (3.75), Apple (3.04), and Microsoft (3.31). Investors are also wise to look at the sentiment surrounding a company's debt/equity situation. BlackBerry is attractive by this metric too. Along with Apple, it has no debt, compared with a debt /equity of 0.40 for Google, 62,43 for Nokia, and 20.58 for Microsoft. Additionally, BlackBerry has a healthy cash per share of 5.48, which should provide some comfort to BlackBerry shareholders. Not surprisingly, some of the competitors are higher when looking at Apple (41.70), Google (163.69), and Microsoft (9.18). At 3.41, Nokia's cash per share is lower than BlackBerry's. Also BlackBerry's cash increased to $3.1 billion as of June 1, up about $200 million from the fourth quarter. In essence, BlackBerry has a good cash position, no debt, and low liabilities.
It is also worth considering the state of BlackBerry's macroeconomic environment. Dependent on consumer and enterprise demand, the smartphones market has a bright future, as the product remains extremely popular. Specifically, industry level sale is expected to grow 32.7% year over year in 2013, reaching 958.8 million units. Additionally, price declines have made the product more affordable to consumers. Both of these factors will help BlackBerry's new initiatives, though the company faces a firm-specific issue in the near future.
As mentioned earlier, BlackBerry missed the most recent earnings estimates because BlackBerry 10 did not show the expected sales. From a strategic point of view, the product needs more awareness. This is why BlackBerry's present and future initiatives are crucial.
BlackBerry's balance sheet remains healthy. Considering this fact, it does seem that a lot of negative sentiment is surrounding BlackBerry. Even if its revenue did not meet estimates, valuation indicators show that investors should push its shares higher. The new initiatives should perform this trick. Ultimately, it is up to investors to trust the company's fundamental analysis, which does show that the stock trades at a deep discount. An undervalued BlackBerry is a good bet to bounce upwards with the initiatives concerning BlackBerry 10.
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.