BlackBerry Ltd (NASDAQ:BBRY) is a Prime Takeover Target
Stock Traders Daily rates BlackBerry Ltd (NASDAQ:BBRY) a String Buy if the stock holds these levels.
In late 2013 we called BBRY as our turnaround stock of the year for 2014. The stock was trading near $7 then, and over the course of the year we suggested that clients sell some of their stock near $11 with the understanding that holding some was just fine given our cost basis. Given the profit from the sale of some and the cost basis on the other portion the combined cost basis for our BBRY shares is under $5, assuming our advice last year was followed, so when you read this observation please understand we are coming at this from a position of strength. (BBRY turnaround story article)
In my opinion BBRY has absolutely turned around, and new management has absolutely put the company back on solid ground, but now the next phase needs to kick in. The next phase is growth, not just stability, so the question is will BBRY be able to grow?
No one seems to think so after the past few days, analysts have been very cautious and skeptical, but I have found that is typical for this stock. Analysts love to hate BBRY.
If we dig deeper though most analysts suggest that BBRY is on the right path, they suggest that company focus is on target, and although the handset business is an ongoing concern they admit that EPS stability is a great sign, and if Revenue starts to improve the tone of the analysts on the street seems to suggest that they will turn much more positive than they seem to be now. There's the big IF!
Will Revenues actually stabilize and improve?
Everyone can see that cost cutting is what allowed EPS to turn positive recently, and that says something important. It tells interested parties that BBRY is not nearly the same risk as it was back in the middle of 2013 when prior management was trying to sell the company to the likes of Facebook Inc (NASDAQ:FB) and private equity investors. For those who don't remember, they were trying to sell for $9 per share, but the bids were rejected. It was that rejection that caused the stock to decline so much and it was on the heels of that decline that we suggested that our clients buy the stock late in 2013.
Now we are seeing something familiar in the shares, and although I will no longer call this a turnaround story, I will suggest that BBRY is set up to be a takeover target. Canadian regulations are big issues of course, but if a company like Samsung or International Business Machines Corp. (NYSE:IBM) has a real interest they are big enough to find a way to make it work.
My analysis suggests that BBRY is set up to be a great takeover target and we recommend that our clients continue to hold the stock and given the recent weakness we would even suggest that new investors consider the stock with a duration of about 12 months in mind. By that time we should see some real interest, revenue stability, and material price appreciation from current levels.