Blackberry Dead Money After January Squeeze

Blackberry Ltd. (BB) flamed out after posting a 9-year high at the tail end of Gamestop Inc.’s (GME) historic January squeeze and has sold off since that time, giving up nearly 70% of the big ramp. It’s a shame because the company turned the corner in recent months, cutting partnership deals for its innovative autonomous driving software.  Sadly, overhead supply could now undermine improved sentiment, leaving long-term shareholders holding the bag.

Catastrophic Market Share Losses

The stock posted an all-time high in triple digits in 2008 when Blackberry was the undisputed king of mobile devices. Steve Jobs and Apple Inc. (AAPL) then released the iPhone, encouraging millions of loyal users to toss their old units and pick up the new machines. Alphabet Inc. (GOOG) followed suit with the highly-popular Android system, triggering catastrophic market share losses that dumped BB to a 17-year low in 2020.

Canaccord Genuity analyst T. Michael Walkley has downgraded the stock to ‘Sell’, noting “While we believe management has created a cogent long-term strategy and the business is turning the corner towards stronger trends, we await more proof in execution on the new product roadmap, evidence of cross-selling opportunities emerging, growing overall software and services revenue, and the potential for upside to our estimates before becoming more constrictive.”

Wall Street and Technical Outlook

Wall Street hates Blackberry, posting an ‘Underweight’ rating based upon 1 ‘Buy’ and 3 ‘Hold’ recommendations. More importantly, five analysts recommend that shareholders close positions and move to the sidelines. Price targets now range from a low of $4.50 to a Street-high $20 while the stock is now trading more than $4 above the median $12 target. Lower prices are likely with this placement, given the huge overhead supply.

The stock broke 7-year support in March 2020 and fell to a multi-decade low at 2.70. Positive action remounted that level in December, attracting strong buying interest that settled between 6.50 and 9.50 before Reddit chatter triggered a two-week 21-point advance to the highest high since 2011. Most of the parabola was unraveled in just four sessions, leaving a massive supply of trapped bulls at higher price levels. This doesn’t bode well for the emerging uptrend.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.