Trade BlackBerry stock but do not own it long term, this fund manager says

Investors thinking about buying BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) should tread carefully because the company has yet to prove itself in a tough software and cybersecurity market.

So says fund manager Kim Bolton, who says the stock is more of a trade right now than a long-term hold.

What’s in store for BlackBerry stock?

We’ll have to wait and see how the company fares with its next earnings report, its fiscal third quarter due on December 20, but the news has not been great for the former phone maker —or really, the lack of good news has been the problem.

Since management boasted early this year that the turnaround from hardware to software, cybersecurity and IoT was effectively complete, investors have been looking for signs of revenue growth and rising profits, items glaringly lacking in the company’s quarterlies.

Its September fiscal Q2 report was a case in point, with BlackBerry’s sales coming in at $261 million, a healthy 22 per cent uptick year-over-year but lower than the $266-million consensus forecast.

BB also posted a net loss of $44 million for the quarter compared to a profit of $43 million a year earlier. The market punished the stock as a result, dropping it from the C$9.00 range to C$7.00 and even lower for a while, territory not seen since before the company rebuild began in earnest. (All figures in US dollars unless where noted otherwise.)

Last year, BlackBerry bet big on cybersecurity by announcing the purchase of California-based Cylance but so far the gambit has failed to pay off, with BlackBerry calling for growth from its cybersecurity segment that’s currently lower than the industry average.

But Bolton says the lack of follow-through has hurt the company and the stock.

“I don’t approach BlackBerry as an investment, I approach it more as a trading vehicle,” says Bolton, president and portfolio manager of Black Swan Dexteritas, speaking to BNN Bloomberg on Friday. “So, right now, sitting at around $7 [per share], if it gets down under $7 we would look to pick it up and then probably lose it at $7.50 to $8.00.”

“It has such strong competition out there, and it has been disappointing, for example, when they bought Cylance. That was supposed to be very accretive and it just hasn’t happened and it has disappointed the analysts,” he says.

“It’s more of a trading vehicle rather than an investment,” Bolton says.

BlackBerry’s share price rose nicely over 2017 as investors warmed to the idea of a resurrection after the company’s smartphone market share dwindled in the early 2010s. But it’s been all downhill from there, from a high of C$18.00 in January 2018 to its current position in the mid-$7.00 range.

Last month, BlackBerry announced that its recently-appointed president and chief operating officer Bryan Palma was leaving the company to pursue other interests. Palma had been hired in only January of this year to head the company’s Internet of Things business. That segment is now reporting directly to CEO John Chen.