Is BlackBerry stock undervalued?
BlackBerry's shifting revenue base and long-term prospects (Part 11 of 12)
BlackBerry misreads consumer needs
Let’s go back to 2007, when BlackBerry’s (BBRY) stock rose to an all-time high of $230, the equivalent of about $120 billion in market capitalization. At that time, BlackBerry controlled more than half of the smartphone market, and its Curve and Bold models were gaining in popularity.
With the arrival of Apple’s (AAPL) iPhone in 2007, consumer behavior changed. Apple devices were more user-friendly. And the abundance of apps available provided consumers with another reason to shift to iPhone.
BlackBerry devices, on the other hand, lacked the ease of use that iPhone’s touch-screen interface provided. Its app store also lacked consumer-friendly apps. Basically, BlackBerry misread what consumers wanted in a smartphone.
What’s more, BlackBerry made the mistake of not maintaining good relations with telecoms such as Verizon (VZ), AT&T (T), Sprint (S), and T-Mobile (TMUS), which shunned BlackBerry products at some point in the last six years.
BlackBerry stock made handsome returns last year
Fast-forward to the present, and BlackBerry investors once again have reason to be optimistic. BlackBerry’s CEO, John Chen, is attempting to revive the company’s fortunes. He’s right to focus on growing BlackBerry’s software business. He’s also right to accept that BlackBerry smartphones cannot compete with Apple iPhone and Android-based smartphones, especially in the consumer market.
BlackBerry stock was trading at $7.44 at the end of 2013, and at $10.98 at the end of 2014, as the chart above shows. A BlackBerry investor made a handsome return of about 48% over the year, rewarded by the initiatives taken under the leadership of the company’s CEO. Yet, even after this considerable appreciation, BlackBerry’s stock could still be undervalued.
The future looks Berry
Reuters recently reported that Samsung was interested in buying BlackBerry at a premium of 38% to 60% of its stock value. Samsung might have bought BlackBerry to strengthen its position in the enterprise market. It might also have been interested in BlackBerry’s valuable patents.
The point is, we could see real acquisition attempts by big companies in the future, and that could spur on BlackBerry’s stock.
As well, BlackBerry is investing in future growth markets such as the Internet of Things. This shows that the company is looking at the long term. The fact of the matter is BlackBerry needs only a little good news to drive its stock higher, because its valuation is so low today.
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