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Still Long Way to Go for BlackBerry

August 7, 2013

By Gulshan Malhotra

Overview

BlackBerry is a Canadian company and is leading maker of wireless smartphones. Company sells its product under the name BlackBerry, that support the global mobile voice and e-mail markets..

The closing price for the stock of BlackBerry as on August 05, 2013 is $9.58. In this analysis, we are not considering just 52 Weeks’s history, but 5 year’s history as well. The purpose to consider 5 year’s history is to accommodate the lows and highs of the business cycle.

Stock Exchange Info

BlackBerry is listed on Dow Jones (NY) with ticker “BBRY”. Its sector is information Technology and industry is Communication Equipments.

Historical Analysis

Table 1: High / Low Prices

Based on 52 weeks low ($6.22), the risk is $2.85 or 30% and opportunity is $8.74 or 91%. The ratio opportun ity vs risk (52 weeks) is 3x. Its historical analysis of 5 years are not useful for investing purpose since company business has seen big swing in the last few years. Its price fluction is from $135 to $6.22. Company 5 year price trend does not correlate with cuurent market trend of BlackBerry.

Volume analysis

Average daily volume is 23.3M shares, which is equivalent to $223M based on the current price. This means that the deals that are equivalent to average $223M, complete in one day. The maximum level of $2M is suggested for the investment to keep the liquidity high.

Analysis Risk vs Opportunity

Company strength is its balance sheet. Its book value is $17.93 and its tangible book value is $11.22. Further, the stock price is $9.58 which is below tangible book value. The risk involve with the investment is moderate at this price value. Let us talk about opportunity. BlackBerry strength is corporate sector which is untouchable by all the players in the market. So, I can say Black Berry will get favourable responece once in the market from Nokia to Iphone. Ipone would like to purchase to make its competative to Android and enter into corporate sector. Android will also have same reason to buy the BlackBerry, While Nokia and Window are the other two players might be interested in Blackberry. I am mentioning this to say that BalckBerry still have value more than $11.22 which is its tangible book value. Even if company decide to not to go for sale, BlackBerry will introduce new model in the year 2013 to establish itself in the smart phone which is a very positive way to be competative.

Conclusion

I will suggest to take a conservative approch and enter to the Blackberry when the opportunity vs risk (52 weeks) ratio is 6x. the ratio will 6x when the stock price is $8.00. $8.00 price will have risk of $1.78 and opportunity of $10.32.

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