Reddit traders love this horrible stock

We can tell by search volume in our TrackstarIQ Data that you folks are interested in Blackberry (BB).

But don’t get caught up in the hype. 

There is value potential, but not at these prices.

This company was left for dead until Reddit traders pushed shares from below $5 to near $30 back in January/February.

As spring rolled around, the minions gathered for another run taking the stock from below $10 to just over $20.

So what’s left over once the meme traders disappear?

No more phones

2016 changed Blackberry forever.

The company exited the smartphone industry, focusing instead on enterprise software and cybersecurity.

It became an IoT (internet of things) company.

They now operate two main segments: software and services (76.2% of revenue) as well as licensing.

Their main products include BlackBerry Spark, a comprehensive security software and services offering, IoT solutions including QNX and BlackBerry IVY

Believe it or not, their QNX software is in over 175 million vehicles worldwide.

To explain their QNX software, think of an operating system as a bunch of programs that run at once. You need one, it’s always there.

QNX allows developers to turn off programs they don’t need, increasing safety, security, scalability, and reliability.

Ever have one program cause the blue screen of death?

Microkernel operating systems like QNX let you restart just that program without messing with others.

You can find BlackBerrys in everything from vehicles to ventilators.

More recently, the company partnered with Amazon’s AWS to enable their IVY to expand their connected and autonomous vehicles vertical.

That’s putting them at the forefront of a high-growth market that should put their overall revenue growth to around 12% over the next decade.

Fundamentals

Last year, the company took some massive one-time hits to their balance sheet including a goodwill impairment of $594 million.

However, they still hold around $849 million.

While it’s a non-cash item, it’s still significant.

Debt skyrocketed as the company added $720 million in long-term debt. However, that corresponded to a reduction of short-term debt by $615 million.

The good news is that they retired debt that ran a 3.75% interest rate to issue $365 million at a 1.75% interest rate maturing in November 2023. They also issued $330 million at a similar rate that is convertible to common stock at $6.00 per share maturing in 2023.

That’s a lot of financial movements to say they swapped out their higher cost debt for lower cost debt.

Although the company lost money according to GAAP, adjusted net income for Q1 (which excludes many of those non-cash charges) landed at $16 million or $0.03 per share compared to adjusted earnings per share (EPS) of $0.09 for the same period in 2020 and $0.11 in 2019.

On a full-year basis, the adjusted EPS came in at $0.18, $0.13, and 0.24 for the 12 months ending in February of 2021, 2020, and 2019 respectively.

Using the adjusted earnings, we’re staring down a price-to-earnings (P/E) ratio of 33x at $6, 55x at $10, and so on.

Our hot take

Long-term, Blackberry certainly has value. But not at these prices ($14+). 

That doesn’t mean it can’t trade higher in the short term.

But, investors who grabbed the stock at sub $5 back in March got a solid deal.

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