BlackBerry was our worst disaster of 2019, this investor says

Investing is tricky, especially on the trading end of the scale. You may think the stars are aligned for a not-too-risky trade, but stocks don’t always play by the rules, with BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) being a case in point, according to technical analyst Keith Richards, who got sucked into betting on the under-performing tech name.

“Every portfolio manager gets to have a dog and that was ours,” said Richards, president and chief portfolio manager at ValueTrend Wealth Management, who spoke with BNN Bloomberg on Thursday.

“It was literally our worst disaster of 2019. We were originally trading it within a range and it would find support in the $10 area and it had resistance in the $15-$20 area. We were trying to trade that. It failed and so we sold,” Richards said.

BlackBerry has done well over the past few weeks, trending upwards after promising results in its latest quarter. The stock has gained 15 per cent since mid-December after beating estimates in its fiscal third quarter ended November 30.

BlackBerry’s adjusted revenue climbed 23 per cent to $280 million and adjusted earnings of $17 million or $0.03 per share. Analysts had been expecting a profit of $0.02 per share.

BlackBerry is seemingly well-positioned in two growth sectors of the economy in cybersecurity and connected technology, but the company has disappointed investors over the past couple of years with its slower-than-hoped revenue ramp.

CEO John Chen has promised better results in 2020 from Cylance, the company’s cybersecurity business acquired last year for US$1.4 billion, meanwhile Chen cautioned in his quarterly comments in December that BlackBerry’s Enterprise Software and Services, which includes its Internet of Things business would stay soft in upcoming quarters.

“The complete offering of Cylance products and services will no doubt help drive stronger revenue growth next year,” said Chen.

Earlier last year, BlackBerry’s share price seemed to have found its bottom in the $9 to $10 range but the stock blew past that after disappointing quarterly results in September. The result was unexpected, says Richards, who thinks the stock could now go lower.

“It’s probably back maybe $0.50 above where we sold but, really, the old support levels are now definitely going to come into play as a resistance point,” Richards said.

“So I’m still cautious on it and I’m not prepared to re-enter it. You have a series of lower highs and lower lows which doesn’t really inspire me to go back in. We took our licking and moved on,” he said.

This past week at the CES Expo in Las Vegas, BlackBerry announced that it was integrating Cylance’s ML security solution into its QNX platform for autonomous vehicles.

“The architecture of cars is changing and we’re happy to be powering the traditional systems and the new next-generation systems safety systems,” said Grant Courville, vice-president of product and strategy at BlackBerry QNX. “That brings in that need for reliability, obviously, but also a big need for security and resiliency…that’s where BlackBerry comes in with Cylance.”