Big Printin’ – BBRY Keeps Drivin’

by Dan May 22, 2017 3:53 pm • Big Printin'

Shares of Blackberry (BBRY) are up 9.4% as I write, up a whopping 63% on the year. No they did not come up with an iPhone killer, they actually don’t make smartphone hardware anymore, for the most part they’re now just a software company. While their smartphone software is now licensed to other handset makers, the cause for the recent strength likely lies more to do with the tech craze of the current period rather than the last decade, and that starts with the connected car and leads to autonomous cars. It just so happens that BBRY has a division called QNX which is deeply embedded in both, here was a description of this group from January’s Consumer Electronics Conference:

The stock’s run today, and the commensurate call volume, 6x that of puts, with total volume 5x usual might have something to do with this Reuters article Samsung Electronics says will continue looking for M&A opportunities, without naming names, BBRY could help round out an automotive strategy:

In addition to buying firms such as Viv Labs and LoopPay, deals that bolstered Samsung’s existing efforts for artificial intelligence and mobile payments services, Samsung is also spending money to break into new businesses.

The firm completed an $8 billion acquisition of Harman International Industries early this year, its biggest ever deal, in an attempt to speed up its entry into the automotive components industry and develop a new growth engine.

There was an apparently opening bullish trade in BBRY, when the stock was trading $10.93 shortly after noon, a trader paid 46 cents for 7500 of the Jan18 13 / 16 call spreads. This trade breaks-even up at $13.46 on Jan expiration, up 23% from the trading price, with a max potential gain of up to $2.54 at 416 or higher, up 46% from the trading price. That certainly feels like a low probability bet, risking $345,000 to possibly make $1.9 million if the stock were 46% higher in 7 months.

While some traders might not forget the stock’s lofty highs back in 2008 near $150, I would also remind you that the company’s sales topped out very near $20 billion in 2011, and this year they are expected to come in just below $1 billion, or about 5% of its peak. The stock is down about 90% from its all-time highs, with 10% short interest, and left for dead sentiment. But as we last talked about in early April (here, when stock was 7.75) the stock could run.

It’s hard to make apples to blackberry comparisons given the current state of the business, and a transition that is yet to be completed. The list of second act companies in tech are few and far between, and I’d be shocked if this stock ever sees $20 again, but at 6x sales, this stock could be gobbled up $8 billion fairly easily, with their patents alone likely to justify a good bit of the purchase price: