BlackBerry is trading at a critical level right now, this fund manager says

Hap SneddonBlackBerry (TSX:BB) certainly has had its ups and downs, not just over the past decade but in 2018 alone, where the share price hit a five-year high of $18.14 back in January, only to slump in trading since.

But shareholders should be watchful of BB slipping below the $13.00 mark, says Hap Sneddon of Castlemoore Inc., who sees it as an important support level.

Back in 2017, BlackBerry was one of the bright spots on the Canadian tech scene, with its share price rising 52 per cent over the year. The company had done much in the way of transformation from mobile handset maker to software and security business, with many giving credit to CEO John Chen.

Chen was hired in 2013 to resurrect BlackBerry after it got soundly trounced by its smartphone competitors, and this year shareholders rewarded Chen for his efforts with a five-year contract extension potentially worth over US$400 million.

Chen’s new contract was backed by FairFax Holding’s chief, Prem Watsa, whose company holds the largest stake in BB at over $500 million. “The reason we put a lot of money in [BlackBerry] was because of John Chen,” said Watsa. “Chen is an outstanding executive — long track record. He had a terrific turnaround at a company called Sybase. And then he says, you know, I bought every BlackBerry that existed and I really don’t want this company to go down. So I said, would you look at perhaps joining the company, and he said, ‘I’ve got to talk to my wife. If she says yes, I will.’ And she said yes and he joined us. If he hadn’t come, we likely wouldn’t have put [in] any money.”

Last month, BB’s share price took a significant fall on the announcement of its first quarter fiscal 2019 earnings report. The company actually beat analysts’ expectations on the back of earnings of US$0.03 per share (consensus was neutral earnings) and revenue of US$213 million (consensus was US$208.2 million). But the company’s enterprise software and services business was down 14 per cent from the same quarter last year, coming in at $79 million. The news caused a ten per cent drop in the stock, which ended up dipping as low as $12.63 by June 28.

Sneddon says that while his company doesn’t currently own BlackBerry, he does own FairFax.

“The $13 level, we want to see it hold that level,” Sneddon told BNN Bloomberg Friday. “Right around $13.00, $13.10, we see that as really, really important.”

BlackBerry closed at $13.42 in Friday’s trading.