MorningWord 6/4/13: With Elon Musk’s portfolio stealing much of the attention among high short interest stocks of late it seems that BBRY, despite 125% gains off of the September 2012 lows and similar high short interest, has recently been left for dead. On a few occasions in this space over the past few months I mentioned my surprise that BBRY had failed to join the party with stocks like TSLA, SCTY, FSLR & GMCR where the short interest is high and the largest holders have very concentrated positions. The table below shows the similar characteristics among the stocks listed above and their eye-popping ytd gains, with BBRY gains merely inline with the Nasdaq.
|Short Int||% of top 5||YTD gains||Market Cap|
I am not going to go into my fundamental view on the stock here (recent thoughts here, here & here) but I have been fairly consistent that the company does not have a future as a stand alone but, with its very strong balance sheet (36% of the market cap in cash & no debt), 70 plus million users and stabilizing service revenues, the company could be a very attractive take-over candidate. I have also been very consistent in suggesting that the sum of the parts is much less attractive in the mid to high teens, but should see significant valuation support in the $10-$12 range.
Which brings me to the one year chart below. In the last 2 weeks, the stock has broken the uptrend that has been intact from the multi-year lows made in Sept and since making a 52 week high in Jan, the stock has made a series of lower highs and lower lows and just recently broken 3 month support.
From a sentiment standpoint, it couldn’t get much worse, Wall Street analysts have almost wholeheartedly put a fork in this one with only 8 Buys, 12 Holds and 22 Sells and an avg 12 month price target of $12.83 (6% lower than yesterday’s close.
The next identifiable catalyst in the stock is the company’s fiscal Q1 earnings that are scheduled for June 28th before the market open. The stock has been a huge mover on earnings, with the avg move over the last 4 qtrs of about 12% and 13.25% over 8 qtrs (only 2 moves higher). The implied move at the moment is about 13%, which seems fair, but it is important to note that 30 day realized volatility is at 52 week lows (the stock has not been moving). Chart below shows historical or realized vol (white line) vs implied vol (blue line) which has recently pick up likely a result of traders getting focused on earnings.
Despite my disdain for their products the lower BBRY goes prior to earnings, or after for that matter, the more intrigued I am by the stock. If the stock continues to creep lower into Q1 earnings I may be inclined to employ one of the take-out strategies that we have detailed on the site earlier this year (here and here). The ideal scenario would be a capitulation move at some point soon that takes the stock back to $12 support, also where the stock started the year. That’s the entry point on my radar. And given the whippy nature of the moves in BBRY in 2013, we might just get it sooner rather than later.