Not too long ago, the bullish thesis for investing in BlackBerry (NYSE:BB) revolved around its keyboard. While Apple (NASDAQ:AAPL) made it cool for smartphones to have glass faces, BlackBerry had stuck to real keys. Then there was also the security selling point. Consensus was that its phones were harder to hack (and it didn’t hurt that former President Barack Obama used one). Now, though, BB stock is an excellent trading vehicle, albeit more ambiguous as a long-term investment.
The bullish thesis for BB stock now is not as obvious as it once was. However, this shouldn’t take away from the recognition management deserves. It just means that investors need to do more due diligence.
Experts on the subject are hard to find. The bulk of the analysts that cover BB are in a “hold” pattern. Still, the scoreboard offers reassurances; over the last four years, the business has been stable. That is absolutely a selling point when a company is adapting to new conditions like BlackBerry is.
Here’s what you should know about BB stock moving forward.
The BB Stock Metrics Are Solid
BlackBerry’s financial metrics should provide a vote of confidence. It’s hard to tell the world came to a halt in 2020 when looking at the BB revenue line. Revenues are about the same, although net income took a hit. The pandemic year cost it about $1 billion there. Still, the running 12-month rate shows improvement.
Tonight, BlackBerry will report earnings, so the trade tomorrow at the open is a binary event. Regardless of how good or bad the results are, the move is about emotions. We don’t know what investors expect, so we can’t predict their actions short term. Luckily, though, the quality of the report will matter thereafter.
If management tells a good story and BB stock falls in spite of it, there will be buying opportunities. It just corrected more than 20% in September. Falling from here will surely create immediate value. Wall Street considers a 20% drop as a recession, so capitulation from such a state creates a lean stock. The only caveat is that management not drop a proverbial tape bomb.
A Future Full of Opportunities
To understand the bullish thesis for BB stock, one must do some old school research. This involves learning about patents because they are pivotal to BlackBerry’s success so far.
The world is going digital and it will eventually be completely interconnected. BB serves the backbones of IoT (Internet of Things) technologies as well as developments like autonomous driving. Intellectual properties are the company’s forte and it continues to build on that. Earlier, I said the bullish thesis is not so obvious — but it is there.
There is a wrinkle in the short-term price action. BB stock is part of the Reddit posse, so it’s prone to catching the “zoomies.” These are wild moves that come out of nowhere. Most recently, back in May, the stock rallied about 130% in a week. Before that, in January, it spiked 275% in under two weeks. Clearly, active traders love this thing. Investors will have to tolerate these swings, but they do serve some good.
A large spike is an opportunity to book some profit and leave runners. Doing that a few times lowers the core-position entry cost significantly, thereby increasing the long-term conviction. There is no rule against sacrificing a few shares for insurance. The stock markets are near their highs and we don’t know when the next crash will hit. The bull market is old but not done. The longer it goes without a correction, the higher the odds of a black swan.
BB Stock: The Nitty Gritty Now
To close, the Federal Reserve has promised that it will be tapering its asset purchase program. This is the quantitative easing (QE) that we’ve had since 2018 and eventually stocks will miss it. My point? It’s okay to be cautious while also staying bullish.
Short term, $9.25 per share has so far held this week and was a base in May. Losing it could bring about a 50 cent drop from there. If that happens, BB stock would then make a good knife to catch.
The zone above $8 per share has seen enough action for months. Such consolidation creates investor confidence. If this bearish scenario happens, the weak hands will shake off and strong buyers will step in.
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On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.