When it comes to returns, the tech story so far this year hasn't been Apple, Google, or Facebook. Instead, it's been BlackBerry.
The Canadian company once known as Research In Motion has been a stock in motion to the upside; it's gained 36% in the last two months. Not bad for a company that has seen a 32% decline in revenues over the last twelve reported months and a loss of $10.18 per share.
Part of what's driving BlackBerry's stock price is a rethinking of what the company is all about.
Its handheld devices – once the symbol of Type A managers who need information RIGHT NOW – have since been eclipsed by Apple's iPhone and the many other Android-based phones (though President Obama is said to still use a BlackBerry for "security reasons"). According to researchers at IDC, BlackBerry's market share in the last quarter of 2013 was a shockingly low 0.6%. That's a drop of 77% in just one year's time.
BlackBerry remains the mobile device of choice for one major sector in the economy. In a post on CNBC.com, CEO John Chen writes:
"Many in the regulated industries—those with the most stringent security needs—still depend solely on BlackBerry to secure their mobile infrastructure. For governments, BlackBerry cannot just be replaced—we are the only MDM [mobile device management] provider to obtain 'Authority to Operate' on U.S. Department of Defense (DoD) networks. This means the DoD is allowed to use only BlackBerry. Across the globe, seven out of seven of the G7 governments are also BlackBerry customers."
(Read Chen's full letter: BlackBerry: The way forward)
However, BlackBerry isn't just about hardware. Under Chen, the company's business units are now devices, enterprise services, messaging (with its BBM platform), and QNX (its operating system for embedded systems).
QNX received a lot of attention recently when it was reported that Ford would be dropping Microsoft Windows for its vehicles' "infotainment" systems in favor of QNX. As well, it turns out that Apple's CarPlay runs on QNX.
Some investors see the sum of BlackBerry's units as being undervalued. Two months ago, when BlackBerry was trading at $9 per share, short-seller Andrew Left's Citron Research valued BlackBerry at $15 per share based on its valuation of each of the units. In a report titled "BlackBerry: Why the Shorts and Analysts Have it Wrong", Citron Research writes:
"While investors are bombarded on a daily basis with media articles about the struggling handset maker as if the Company was going to fall apart any day, the reality is it has a healthy balance sheet, with ample liquidity to execute its turnaround strategy and make the necessary investments for growth."
But, BlackBerry has a long way to go to its peak in 2008, when it was trading in the $140s. At roughly $10 per share, the stock isn't even close to where it was two years ago when it was above $60. Nonetheless, is BlackBerry a buy at these levels?
CNBC contributor Gina Sanchez, founder of Chantico Global, says QNX is the BlackBerry division to watch, particularly given its market share in the automotive space.
"QNX has about 50% to 70% of the [automotive connectivity] market," says Sanchez. "With more and more car companies dropping Windows, that basically means that they're going to command the automotive market. And that's worth something."
Steven Pytlar, Chief Equity Strategist at Prime Executions, says the charts echo Sanchez's positive outlook on BlackBerry.
"In the short-term, it looks very good," says Pytlar. "And, the short-term tells us the long-term could look a lot better than it has over the past several years."
Looking at a one-year chart of BlackBerry, Pytlar sees a "cup and handle" pattern with its higher lows indicating a possible bullish move were it to break above its resistance between $10.50 and $11.50 per share. And, should it do so, he projects the stock going up to as high as $16. The reason for such a high target, according to Pytlar, is that the investor base changed for BlackBerry.
"There was a total washout of sellers," says Pytlar about the last couple of years for the BlackBerry. "Everyone got out of the stock. There were no long-term holders. The entire investor base turned over. What happens is then you have a resetting of expectations. It went from a device company to a software company. Now it has a completely different valuation, a new investor base, and you see accumulation based on that."
To see the full discussion on BlackBerry with Sanchez on the fundamentals and Pytlar on the charts, watch the video above.
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