BlackBerry (NYSE:BB) stock was one of the biggest winners from the recent Reddit/WallStreetBets excitement. BB stock traded around $5 last November, prior to the launch of meme magic. For a brief moment in January, BlackBerry squeezed up to nearly $30 per share. However, the enthusiasm quickly gave way; BlackBerry has slid back around $11.
It’s not hard to see why. The leader of the Reddit stocks, GameStop (NYSE:GME) has lost 90% of its value since its recent peak. Other leading Reddit stocks like AMC (NYSE:AMC) are also nursing large losses. WallStreetBets in general has lost much of its mojo.
GameStop’s lead promoter Roaring Kitty (aka Keith Gill) is now the subject of a market manipulation lawsuit. In light of that, the appeal of other Reddit stocks like BlackBerry has definitely diminished. And, unlike GameStop, BB stock didn’t have an especially large short interest either, making it even harder to sustain the short squeeze.
However, is there more to BB stock than just the meme magic?
Unlike GameStop or AMC, BlackBerry isn’t an irreparably broken business. BlackBerry isn’t trying to sell physical video games out of half-empty malls. Nor does it run a bunch of movie theaters that have been slammed by the novel coronavirus in the age of streaming. Rather, BlackBerry runs a software business that seemingly has at least decent odds of success.
BlackBerry: Not Your Daddy’s Cell Phone Company
About 15 years ago, BlackBerry (then called Research in Motion) was one of the Nasdaq’s hottest stocks. Jim Cramer frequently touted Research in Motion as one of the “Four Horsemen” tech stocks that investors had to own. In general, the Four Horsemen have done well, with Apple (NASDAQ:AAPL) in particular being a world-beating stock. So Cramer gets a ton of credit for that.
However, Research in Motion was the one lame horse out of his group. At the time, Cramer praised Research in Motion for “mopping the floor with Palm’s Treo.” There’s a blast of nostalgia. Soon, though, it’d be Apple cleaning up in the smartphone wars.
While Research in Motion’s stock crashed once the iPhone reined supreme, the company didn’t disappear. It renamed itself BlackBerry to help highlight its transition away from hardware and toward software and services. While BlackBerry could no longer compete in the smartphone space, it still knew how to run a smart and secure operating system.
BlackBerry has now, quietly, managed to become one of the leaders in the automotive software space. Assuming self-driving cars take off, BlackBerry could manage the OS powering it all. That’s a pretty cool comeback for a company that once looked rather down and out. So ignore all the memes about old BlackBerry phones. BB stock today is a far different bet.
How Strong Is BlackBerry’s Competitive Position?
While BlackBerry has a real and credible software business, with competitive offerings across several verticals, the numbers just aren’t there right now. The company’s revenues have shrunk at a rate of 20% per year compounded over the past five years. From 2016 to now, annual revenues have declined from $2.1 billion to a hair under $1 billion over the past 12 months.
Now, to be fair, some of that is from legacy businesses. The core software business is also shrinking, albeit at a slower rate. And you can blame a portion of that due to transitions in the software cycle. BlackBerry keeps signing up quality new customers, and it seemingly has a software package – particularly for cars – that remains near the front of the pack competitively. Our Louis Navellier recently detailed BlackBerry’s strategic partnership with Baidu (NASDAQ:BIDU) to power its autonomous driving package.
BB Stock Verdict
I can make a great case for why all these pieces fit together in theory. However, the numbers just don’t support a bullish position yet, at least not up here at $11/share. It makes perfect sense why folks were attracted to the stock back when it was in the mid-single digits.
Unlike many of the other meme stocks, this is a real investment candidate with a credible business. The company has successfully gotten past phones and moved into next-generation software that could be highly successful. There’s a viable argument for BB stock here. But, me personally, I just can’t get comfortable with the falling revenue trend, particularly at a more than 6x price/sales multiple.
If you like BB stock, consider waiting a few weeks. As the Reddit excitement continues to wear off, a better entry point should develop for BlackBerry’s shares.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.