Well, I hate to be the one to say I told you so, but, I told you so. Back on May 17th I warned readers that Research In Motion Ltd (NASDAQ:BBRY), or technically, BlackBerry now, was not only headed into some technical (chart-based) trouble, but also that the underlying fundamentals just weren't cutting the mustard for current or prospective BBRY shareholders. The stock ended up drifting under the support line I pointed out then - your first red flag - and today the bottom completely dropped out for BlackBerry/Research In Motion Ltd shares. If you weren't out before today, there's nothing you can do about it now.
I don't come here to gloat about my BBRY call though (well, not to gloat much). I come here to explain and update about what may be next for the company formerly known as Research In Motion.
First and foremost, know that this stock (and I don't mean the company - I mean the shares themselves) are an enigma. They only reflect the potential value of the underlying company if and when investors feel like letting it. And lately, they haven't let it. Instead, it's been a speculating instrument, almost entirely driven by traders just trying to guess what the next batch of traders will feel, with the ultimate goal of leaving someone holding the bag. [Oh, and just for the record, if you still owned BlackBerry/Research In Motion Ltd shares as of yesterday's close, you were the one left holding the bag.]
The nearby chart tells the tale. A couple of days after a I pointed out how BBRY was getting squeezed into a converging wedge shape and warned that the situation couldn't last indefinitely, the stock fell under the rising support side of that formation. It also drifted under a couple of short-term and an intermediate-term moving average line. That should have been your first warning that BlackBerry/Research In Motion was something that traders were quietly trying to shed in front of earnings...
... which were atrocious. Well, actually, atrocious is a relative idea here. Sales were up more than 9%, and topped expectations. Profits, however, were not only disappointing, but negative. The market was expecting income of $0.06 per share, but Research In Motion Ltd, err.... sorry, BlackBerry, booked an operating loss of $0.13 per share.
I'll let you in on a little secret - even if it had earned $0.06 per share, it wouldn't have been a great number. Remember, the past two quarters should have been huge ones for the company, as it launched two new smartphones... the only new meaningful products we've seen from the corporation in a long while. The bulk of the sales of new phones comes within a few weeks of their launch. Indeed, if BlackBerry's pace is anything like Samsung's or Apple's smartphone launches, then it will sell more in the quarter of the debut than it will sell during all other quarters combined. Translation: Last quarter was Research In Motion Ltd's best shot, and it fizzled.
Even scarier is something CEO Thorsten Heins said of the quarter: "Over the next three quarters, we will be increasing our investments to support the roll out of new products and services, and to demonstrate that BlackBerry has established itself as a leading and vibrant player in next generation mobile computing solutions for both consumer and enterprise customers." Spending more? The top line will undoubtedly fade no matter how much the company spends, and he plans to make the loss bigger?
It's certainly got to be frustrating not just to the company, but also to BBRY shareholders. The Z10 and the Q10 are solid products, and bluntly, meet their targeted need quite well. The problem is, not too many people need them, and for those that don't need a BB10-powered system, the iOS or Android - both with bigger app ecosystems as well as greater availability through carriers - just makes more sense. Today's 27% plunge from the stock reflects the market's realization of that idea.
So now what? Well, for traders, BBRY is a buy. It's oversold, and the company name - whether it's BlackBerry or Research In Motion Ltd - still draws a crowd. That could spur a pretty good bounce. For true investors though, last quarter's numbers and company comments are a microcosm of the company's reality. There's just not a lot of longevity here.
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