Should you buy BlackBerry stock?

Analysts conflicted after BB10 launch

A Blackberry employee holds a mobile phone of Blackberry in Berlin in this Nov. 8, 2011, file photo. Research in Motion went from being a company revered worldwide for its innovative phones — coveted status symbols proudly carried by world leaders, executives and celebrities — to an industry also-ran that's down to its last chance with BlackBerry 10. THE CANADIAN PRESS/AP/dapd, Berthold Stadler

Canadians still have a week to think about whether or not they should buy the new BlackBerry 10, but for many investors their BlackBerry buying decision is happening right now.

Since the big announcement yesterday, RIM — soon to be BB on the TSX — has fallen by about 18%, surely a disappointment to the many BlackBerry loyalists who’ve hung on to the stock, and their phones, for years.

Many analysts and fund managers had been telling investors to stay the course until the BB10 was revealed. If it was as good as RIM had said it would be, then the company would be able to compete and the stock price would rise.

So now what? The device received some rave reviews, but also many middling responses. While most agree that it’s a step in the right direction, it’s hard to see how this phone will halt Apple or Samsung’s momentum. And that has some people concerned. “If the company is still the number four supplier of handsets, it won’t be able to generate the huge profits you’ll need for the share price to rise,” says Norman Raschkowan, executive vice-president of investments at Mackenzie Financial.

However, at this point, Raschkowan says there’s nothing that says investors must sell or that they must buy. The company’s fundamentals are attractive — it has little debt, for one — and it’s still possible that the device will be a hit.

Jan Dawson, the chief telecoms analyst at Ovum, a U.K.-based research firm, thinks that over the next three quarters the news out of Waterloo will be positive. “They’ll be profitable again, at least somewhat,” he says. They will sell new devices and that will boost earnings, but he’s worried about what will happen in 2014 and beyond.

There is always a chance that the company will regain lost market share, but it’s more likely that it will find favour only among existing BlackBerry users, says Dawson. As well, in emerging markets, where the brand is doing well, consumers are now turning to lower cost Android devices, so investors shouldn’t bet on developing nations for any sort of financial boost, he says.

The good news is that it’s likely the share price will stop plummeting soon. Speculators, says Raschkowan, ran up the stock in the weeks leading up the launch announcement and are now selling their shares. It’s a typical “sell-on-the-news” event, he says, but that will end.

If you’re unsure of what to do, take comfort in knowing that you’re not alone. Analysts are confused too. Right now, 20 have a hold rating on the company, 21 have a sell rating and only five have a buy rating. Target prices range from $6.50 to $19. Goldman Sachs was one company that reiterated its buy rating on the stock after the launch. It thinks the next three quarters will be positive, but admits that there is one significant, and obvious, risk: “A lack of follow-through demand post the BB10 launch,” the company wrote in a report.

While many think that the stock price will see some gains over the next few quarters, don’t bet on the share price ever reaching Apple-like heights. If you think the company will one day sell its assets or intellectual property — which many think it may — or it will make a miraculous turnaround, then buy now when the price is cheap.