BlackBerry: A Call to Inaction!
by Marek Fuchs
When it comes to stocks, standard operating procedure on Wall Street is to strike an active pose. “Buy!” say analysts. Or “sell!” Or actively “hold!”
Is this convention overdone? And, in certain cases such as BlackBerry (BBRY), which just reported a surprise 4Q earnings beat that raised and answered an equal number of questions -- is it potentially harmful?
BlackBerry is probably doomed. But with Apple’s (AAPL) questionable ability to innovate in a post- Jobs world, the company stands at least a metaphysical possibility of returning to form. So perhaps another designation, aside from “buy, sell or hold” is needed in this case. Perhaps analysts should rate BlackBerry a “Monitor!”
That’s right: don’t buy, don’t short but also don’t run from the scene and never look back. Hang around and watch, paying particular attention to the performance of new products in the American market.
The right implication
“Monitor” has the right implication: that you have a sense the company’s fortunes will lurch to an extreme but have no idea to which extreme. The humble nature of this acknowledgement (“I don’t know yet and won’t for a while”) gives you a leg up on all those who claim they have answers – even the publications who claim both answers.
Just look at SeekingAlpha in the run-up to the earnings release: BlackBerry Reminds Me Of Palm Just Before The End reads one. BlackBerry's Stars Are Aligned reads another.
Worse, even in the wake of its earnings release, BlackBerry’s circumstances are no clearer. The Waterloo, Ontario-based company reported a surprise profit of 19 cents a share (versus expectations of a 29-cent loss) but revenues came in markedly light, at $2.7 billion. Thompson Reuters had top line consensus at $2.84. Just as inconclusively, BlackBerry, which has hitched a good part of its fate on the Z10 device, sold about 1 million in the quarter -- but overseas. Last week’s release in America was greeted with crickets, with many – including Goldman Sachs (GS), which downgraded the stock – decidedly underwhelmed by everything from shelf placement to consumer response.
Granted: that was only a week’s worth of sales, numbers so fresh that they didn’t even show up in the fourth-quarter report. But that’s the point. Anyone who truly claims a bead on BlackBerry’s future at this point is either kidding themselves or you – or both.
And so there you have it. Instead of visibility, you have soup and fog. The earnings were neither remarkably good or abandon-all-hope bad. But that’s par for the course in such high-profile, high-stakes comeback attempts.
We’ve see it in companies from J.C. Penney (JCP) to Hewlett Packard (HPQ), which suffer wild swings in expectations, despite the fact that it’s hard to know what’s going on for quite some time.
On little more than a hunch, BlackBerry’s stock has basically doubled the past six months, while its short count has risen to nearly a third of its total float, according to FactSet. This adds the potential for even more swings in mood and stock price.
As a result, don’t feel forced into a decision. Monitor.
Here’s what you need to Monitor: whether the Z10 can, given a legitimate amount of time, grab a foothold in the American market. Meanwhile, how do fellow sob sister Nokia (NOK) or powerhouses Apple, Google (GOOG) and Microsoft (MSFT) react?
The situation is too fluid for definitive answers. In the meantime, there’s no need to rush. When it comes to comeback stories, the jump to conclusions is akin to one of the lip of a cliff. Buy? Sell? Hang on to the stock without adding to or lightening your position? No, no and no. Consider this your call to inaction. Keep your distance but keep tabs on further developments going forward, knowing that the stock is probably going to go much higher -- or to zero.
When it comes to BlackBerry, just monitor!
Marek Fuchs was a stockbroker for Shearson Lehman Brothers before becoming a journalist who wrote The New York Times' County Lines column for six years. Fuchs speaks regularly on business and journalism issues at venues ranging from annual meetings of the Society of American Business Editors and Writers to PBS to National Public Radio. His recent book, "Local Heroes: Portraits of American Volunteer Firefighters," earned widespread praise. He is on the writing faculty at Sarah Lawrence College. When Fuchs is not writing or teaching, he serves as a volunteer firefighter. You can contact him on Twitter: @MarekFuchs.
