The stock may be back in the news for its precipitous rise last week but investors looking to do more than gamble with their money should stay clear of BlackBerry (BlackBerry Stock Quote, Chart, News, Analysts, Financials TSX:BB), says fund manager David Baskin, who sees trouble in a stock whose movements have no connection to the company’s fundamentals.
It’s a new week and perhaps a new adventure for BlackBerry, which saw a carnival ride of ups and downs last week, as the security software and connected tech company joined fellow meme stock AMC Entertainment (AMC Entertainment Stock Quote, Chart, News, Analysts, Financials NASDAQ:AMC) in what looked like a second wave of Reddit-inspired piling onto a few names favoured by retail investors.
BlackBerry finished the week up 49 per cent after falling five per cent on Friday, leaving the stock up an incredible 115 per cent year-to-date. The company has had no significant news to report recently yet was the third-most traded stock on Fidelity’s trading platform last Wednesday, with AMC at the top spot, as reported by CNBC. Trading volume rose midweek as 346 million shares were traded on Wednesday compared to less than five million about a week earlier.
For Baskin, president of Baskin Wealth Management, that kind of action should keep any sane investor staying on the sidelines.
“The price action of the stock has nothing at all to do with the company, its prospects, its earnings or really anything else,” said Baskin, speaking on BNN Bloomberg on Friday.
“Blackberry is a shadow, a spectre and a trace of its former self, and it’s an unprofitable company. One doesn’t know if it will ever return to profitability, or if it does, how much that profit might be. Nonetheless, we’ve seen wild action in the stock with huge volumes,” he said.
“I don’t view what’s happening with any of those stocks as having anything to do with investment. It’s some sort of strange gambling. And if you want to gamble, in my view there are other ways to do it. I wouldn’t touch BlackBerry right now under any circumstances,” Baskin said.
BlackBerry had been on a multi-year slide right up until late last year when the company announced details on a partnership with Amazon Web Services, one which sees the two teaming up to create what they hope will be the default operating system for connected cars.
The partnership has the cloud computing giant working on BlackBerry’s Intelligent Vehicle Data (IVY) platform for collection of data from car sensors and delivery on in-vehicle applications and monetization.
“[IVY] will build upon BlackBerry QNX’s capabilities for surfacing and normalizing data from automobiles and AWS’s broad portfolio of services, including capabilities for IoT and machine learning. BlackBerry IVY will run inside a vehicle’s embedded systems, but will be managed and configured remotely from the cloud,” BlackBerry said in a December 1 press release.
“As a result, automakers will gain greater visibility into vehicle data, control over who can access it, and edge computing capabilities to optimize how quickly and efficiently the data is processed,” the company said.
News of the collaboration helped lift BlackBerry’s share price to about even for the year in a 2020 that was up until then in the red. But the real fireworks came in January as momentum started growing behind a few stocks with heavy short-seller positions. Names like AMC, Bed Bath & Beyond (NASDAQ:BBBY) and video game retailer GameStop (NYSE:GME) vaulted ahead and pulled others like BlackBerry and Nokia (NYSE:NOK) with them.
BlackBerry’s share price went from $8.44 at the start of January to as high as $31.49 on January 27 before falling back all the way to $10 by mid-May. By the end of last week, BB had returned to just below $17. (All figures in Canadian dollars except where noted otherwise.)
BlackBerry’s latest reported quarter, its fiscal fourth 2021, saw revenue decrease year-over-year to US$210 million compared to US$218 million for Q4 2020 and compared to analysts’ consensus estimate of US$245 million. The company said sales of its connected car software were beginning to show some life again after a stagnant 12 months for the auto sector.
“This has been an exceptional year to navigate, however we are pleased with QNX’s continued recovery, despite new challenges from the global chip shortage,” said CEO John Chen in a press release. “QNX now has design wins with 23 of the world’s top 25 electric vehicle OEMs and remains on course to return to a normal revenue run rate by mid-fiscal 2022.”
Baskin said by looking at the stock’s movement, investors aren’t really seeing anything about the true value of the company and its prospects, a disconnect which should be a huge red flag.
“If you feel like the stock market should be like going to your local casino, then sure, buy Blackberry [or] go to the casino bet on black — it’s really much the same thing. You know you might double your money in one day you might lose 50% of your money in one day. It’s not that different from a roulette wheel,” Baskin said.
“If you’re in the long term investment business where you’re trying to buy things that will be valuable over time then there’s much too much noise around BlackBerry and you can’t figure out what’s really going on,” he said.
“We side with Warren Buffett on this. If we don’t understand it, we stay away from it,” Baskin said.