Today, the company formerly known as Research in Motion (RIMM) became BlackBerry (BBRY). On Friday, RIMM had closed at $13.03. Today, BBRY opened at $13.71, up 5.22%. Throughout the day, BBRY continued to perform extremely well despite a declining market. At the end of the day BlackBerry closed at $14.98, up 15.02% for the day. In after hours trading BlackBerry is trading up $0.15 or 1%. Overall, BBRY had a great day while the market heads lower— Dow down 0.93%, S&P 500 down -1.15% and the Nasdaq 1.51% lower. So why did BlackBerry end up 15% higher today? Was the Super Bowl commercial that good, or does this company really have value? Let me lay out what I think every investor should know about BlackBerry before they take out their checkbooks and invest in this stock.
After numerous delays and development issues, BlackBerry finally unveiled their new phones on January 30th, 2013. On that same day, they also decided to drop the Research in Motion name and just simply be BlackBerry. The two phones are the BlackBerry Z10 and the BlackBerry Q10. The Z10 is 4.2 inch touchscreen smartphone, similar to the popular smartphones currently in the market, such as the iPhone. The Q10 however still contains the iconic physical BlackBerry keyboard. Both will run the company’s new operating system, BlackBerry 10. Looking at the graph below, you can see that on the day of the announcement BlackBerry actually decreased. The reason, I think, is that investors have been waiting for BlackBerry to come out with a new phone for almost 18 months now, and this just wasn’t big enough to restore faith in BlackBerry. In addition, the fact that the phones wouldn’t be available in the US until March might have discouraged investors as well. This sent BlackBerry stock back into the $13 range, which is great entry point for the stock based on a Discounted Cash Flow (DCF) valuation (valuing the stock at $20) and relative valuation. However, I am a little skeptical to whether or not BlackBerry will be successful in the future.
Today, when BlackBerry started trading under the new name and ticker, BBRY, we saw it end the day up 15%. When i was trading BBRY today, it seemed as if I was trading an IPO. BlackBerry had been on a downtrend ever since the unveiling of the two news phones, and today, as soon as it started trading under the new ticker we see it do extremely well. I read an article today that said that sales in the UK seem to be strong. Some places where running out of the phone, and most where seeing strong demand. According to a note obtained by Forbes, an analyst at Jefferies stated that “We estimate sell-in to be at least several hundred thousand units. To put that in perspective, the iPhone had first weekend sales of 5 million+ in the U.S. The U.S. is five times larger so continued strong sales could bode very well for Blackberry.” If this holds true, BlackBerry will see their stock jump higher than the 15% we saw today.
I would be very skeptical when trying to trade BlackBerry. Early indicators such as UK sales, tell us that they might have a good product and people might like it. However, we have to keep in mind that it might be a little too late for them. People have already fallen in love with the iPhone and the Galaxy, so it might be tough trying to win these users over. Also, the US will be the biggest test to see if BlackBerry will comeback and be successful. Since the new phones will not be available in the US until end of March/early April, it will be tough to see if they can regain some market share. I will continue following BlackBerry and see how the new phones perform in the UK and Canada. This will give me and idea of how the phones might perform in the US once they are released here. That being said, I think that BBRY does have potential but I’m not 100% convinced yet. I would continue trading this stock at small blocks or even options. This way, you will not be risking much and at the same time you will not miss any big moves, like the one today. I will keep you guys updated as more data comes out.