QuickNote 7/2/14 – Smelling a Big Upgrade in BBRY
Blackberry (Nasdaq: BBRY) has been all over the press lately, what with the leaks in the new passport phone and all the chatter about QNX becoming the platform for owning the Internet of Things (IoT) marketplace, an emerging market that John Chambers himself says will be in the trillions.
The new CEO John Chen has been cleaning house, dumping old phone inventory and re-positioning the company around its’ core strength, namely secure enterprise mobility and communications.
A few months ago fund managers and desks that I’ve spoken too rarely mentioned the name. Now it makes people’s top 5 & top 10 lists of favorite names all the time. It’s amazing to me how quickly Wall Street’s perception on this name has changed.
I see enough large institutions getting into the name recently that BBRY is smelling like there is a major upgrade in the works. Analysts are the ultimate in herd mentality folks. Best time to upgrade a stock is on the way up. Brian Modoff, the excellent analyst at Deutche Bank, has been on the money with this name, last publishing a piece 2 weeks ago entitled “Improvements, but not out of the woods”. I think he has his finger on the pulse and you could see an increase in his admittedly-pessimistic $8 target. BMO Capital’s Tim Long has been another solid guy on this name and he is also telling clients lately that Blackberry is “moving in the right direction”. His $9 target is looking increasingly irrelevant as well.
Trading names like Blackberry takes an experienced hand at the till to identify situations where the analyst community is behind the rank-and-file. Over the past twenty years I’ve seen this play out countless times. Blackberry seems to me to be one of those situations where you have a high likelihood of a slew of upgrades as the quarter tracks well, new products look to shine, and the analyst community starts to worry about being too pessimistic on a name that still generates significant trading commissions.
As of the publication of this report, the author was long Blackberry common stock and/or call options.