Yahoo Finance BlackBerry stock on rocket ride
Despite posting a US$4.4 billion loss last month and continued warnings of red ink to come in 2014 as it refocuses itself toward enterprise customers, BlackBerry has been riding a notable wave in the markets as investors have pushed its stock up over 85 per cent since it bottomed out at $5.79 on Dec. 9. In January alone, the share value has risen 36 per cent despite the near-total absence of additional substantive sales or performance data.
Two key wins
Monday's confirmation by the Pentagon that it would add 80,000 BlackBerry devices to its new mobile device network added fuel to the fire, boosting the stock over 8 per cent to 10.80 amid a run-up that’s seen it outpace every tech stock in the market in the last month. A bullish Citron Research report, published Friday, that set a $15 price target thanks to a solid balance sheet and a strong management team, had also sent the stock soaring.
What’s going on?
As the company’s stock has eroded from its all-time high of $148, reached in 2008, it has experoenced repeated temporary reversals that saw it jump amid a seeming torrent of negative news. While some of it can be attributed to bargain-seeking investors looking for a quick against-the-grain opportunity, short-sellers, in what is essentially a calculated bet that the company will continue to decline, have been accountable for most of the contra-indicated increases.
That might explain a day or two of unusual market buoyancy, but the current rally kicked off in earnest on December 9th, so something longer-term is in play. Give John Chen all the credit.
The new CEO has been fairly quick to triage the company’s challenges, sweep former leaders out of office and bring in his own team. He’s sent letters to employees, investors and customers, explaining in stark detail the challenges the company faces and how he intends to address them. Perhaps most importantly he’s put meat around the company’s pivot from all-encompassing handheld vendor to an enterprise-focused mobile services company.
You always expect change when a new sheriff rolls into town, but Chen, who before joining BlackBerry had transformed Sybase from a money-losing also-ran into a powerhouse that ultimately sold to SAP for $5.8 billion, has introduced unprecedented-for-the-company transparency and re-established critical trust in the role. In doing so, he’s given investors a tangible reason to re-engage.
Chen gets specific
While his predecessor in the role, Thorsten Heins, spoke often about BlackBerry’s transformation, Chen has set himself apart by saying exactly what the transformed company will look like, who it will serve, and how it intends to do so. Broad future-looking statements have been replaced by detailed roadmaps that make it easier for stakeholders to understand what’s changing, and how they respectively fit into the overall picture.
As helpful as this is for still-layoff-weary employees – it keeps them focused at a time when they might otherwise be polishing their resumes – it more critically reinforces to investors that the company will have the resources to execute on its plans. Add in a strong balance sheet with zero debt and a cash pile that despite sustained losses continues to grow and give BlackBerry more runway and it’s becoming somewhat easier to see why investor trust has been growing.
In the cold logic of market valuation, a six-week-long share value runup in the wake of ongoing losses, falling sales and a still-unproven transition plan may still make little sense on the surface. But BlackBerry has never been an on-the-surface company, and there remains enough going on behind the scenes to keep investors intrigued.
Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca
