Options Trade – BlackBerry Ltd (NASDAQ:BBRY) Calls 
Thursday, November 13, 2014

**OPTIONS TRADE: Buy the BBRY Mar 2015 12.000 call (BBRY150320C00012000) at or under $1.00, good for the day. Place a protective stop loss at $0.40 and a pre-determined sell at $2.00.

by Ian Harvey

November 13, 2014

Introduction

BlackBerry Ltd (NASDAQ: BBRY), formerly Research In Motion Limited, is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market, is providing great optimism ahead of today's highly anticipated investor day.

BlackBerry Ltd has had quite an exciting week, which has rallied almost 7% from last Friday's close to its current perch at $11.23, thanks to upbeat comments from CEO John Chen, and today, the company will launch its new BES12 mobile management platform. As the stock continues its upward momentum, a round of upgrades and/or a short-covering rally should help fuel the equity's fire, as, at the moment all 20 analysts covering the shares maintain a "hold" or worse suggestion – which leaves plenty of scope for a strong move up.

Technical Details

BlackBerry has a 1-year low of $5.44 and a 1-year high of $11.65. The stock’s 50-day moving average is $9.97 and its 200-day moving average is $9.41. The company’s market cap is $5.790 billion.

Earnings

BlackBerry last released its earnings data on Friday, September 26th. The company reported ($0.02) earnings per share for the quarter, beating the analysts’ consensus estimate of ($0.16) by $0.14. The company had revenue of $916.00 million for the quarter.

During the same quarter last year, the company posted ($0.47) earnings per share. BlackBerry’s revenue was down 41.8% compared to the same quarter last year. Analysts expect that BlackBerry will post $-0.31 EPS for the current fiscal year.

Positive Points for Blackberry

1. Brisk Passport Sales

One nice thing about the debacle of the Q10 and Z10 launch in 2013 was it set expectations low. Nobody is expecting BlackBerry to sell millions of devices this time around.

Although the company hasn’t released actual Passport sales numbers yet, analysts are estimating approximately 600,000 have been sold so far, modestly surpassing expectations. BlackBerry has also been intentionally limiting supply to stores in an attempt to create artificial demand. It appears to be working.

Assuming BlackBerry can continue brisk Passport growth, the company should be able to post a profit during this quarter, something it hasn’t been able to do consistently for years. If this happens, the stock will most likely pop on the news.

2. A Great Balance Sheet

Every company going through a turnaround needs a solid balance sheet that can weather the storm until consistently profitability. BlackBerry has that balance sheet.

The company is currently sitting on $2.7 billion worth of cash, which is approximately $5 per share. That’s offset by $1.6 billion in debt, the majority of which is convertible to equity at $10 (U.S.) per share. Book value is just a little under $7 per share. The balance sheet is no longer deteriorating, as the company has been cash flow positive during 2014.

Additionally, BlackBerry is sitting on a large patent portfolio that it has just begun to attempt to monetize. It could start filing lawsuits against competitors or perhaps sell the patents to a competitor. The patents are valued on the balance sheet at $1.3 billion, but some analysts say they’re worth up to three times that.

3. Possible Chinese Partnership

A few weeks ago, Chinese PC maker Lenovo was rumored to be considering a takeover bid for BlackBerry. This is unlikely because of the Canadian government’s reluctance to a deal, there’s certainly a possibility that the two companies come up with a licensing deal. BlackBerry provides the handsets or software, and Lenovo is in charge of selling to the Chinese, a market it knows well. It looks to be a win-win deal.

This looks increasingly likely to happen. BlackBerry’s CEO John Chen has admitted to discussions with both Lenovo and Xiaomi execs, and he has been publicly supportive of using partnerships to help grow the company in other markets. Getting an inroad into China could end up being a huge boon for both the company and the stock price.

4. The Ontario Teachers’ Pension Fund Input

According to Bloomberg, the Ontario Teachers’ Pension Fund is now among the top ten shareholders of the Canadian smartphone manufacturer. The retirement fund acquired approximately 7.8 million shares of BlackBerry Ltd based on its regulatory filing for the third quarter.

The Ontario Teachers’ Pension Fund owns 1.6% of the outstanding shares of BlackBerry Ltd. Its stake in the company has a market value of approximately $84.5 million based on the closing price of the stock on Thursday.

5. Chen’s Leadership

Chen took over as CEO of BlackBerry Ltd on November last year, when the company was in a very difficult situation. BlackBerry Ltd improved during Chen’s first year as CEO. He reshaped the company by implementing different strategies such as selling some of its real estate assets, outsourcing manufacturing and concentrating on BlackBerry’s core business.

Mike Walkley, managing director of Canaccord Genuity recentaly stated that Chen did a commendable job in reviving BlackBerry. According to him, Chen’s roadmap for the company’s future is clear.

6. BlackBerry among the Top Global Innovators for 2014

The Canadian smartphone manufacturer was included in the IP & Thomson Reuters list of Top 100 Global Innovators for 2014. BlackBerry Ltd was chosen this year due to its efforts in revitalizing its business, establishing a separate unit to manage its patent portfolio, and the launching of its new smartphone—BlackBerry Passport.

Analysts Opinions

BlackBerry (NASDAQ:BBRY)‘s stock had its “neutral” rating reissued by Zacks in a research report issued to clients and investors on Tuesday. They currently have a $12.00 price target on the stock. Zacks‘s target price would indicate a potential upside of 8.11% from the stock’s previous close.

Zacks’ analyst wrote, “BlackBerry reported narrower than expected loss in the second-quarter of fiscal 2015. Revenues were in line with the Zacks Consensus Estimate. Declining smartphone sales, stiff competition from handset manufacturers, lackluster operating platform and a change in business model will continue to act as headwinds for the company. However, a healthy balance sheet, an extensive patent portfolio, launch of the BES12 platform, presence in over 147 countries, the partnership with Foxcon and the agreement with Secusmart are likely to foster growth while moving ahead. Moreover, implementations of effective cost-control measures, divestiture of unprofitable units and targeting the highly populated markets of India and China will not only drive margins but will also boost cash flow going forward. Hence, we maintain our Neutral recommendation on the company.”

The company has also been the subject of a number of other research reports:-

• Analysts at Canaccord Genuity reiterated a “hold” rating on shares of BlackBerry in a research note on Monday, October 13th.

• Separately, analysts at Imperial Capital initiated coverage on shares of BlackBerry in a research note on Monday, October 6th. They set an “in-line” rating and a $10.00 price target on the stock.

• Finally, analysts at ING Group initiated coverage on shares of BlackBerry in a research note on Monday, October 6th. They set an “in-line” rating and a $10.00 price target on the stock.

Six investment analysts have rated the stock with a sell rating, eighteen have issued a hold rating and one has issued a buy rating to the company’s stock. BlackBerry presently has a consensus rating of “Hold” and an average target price of $8.91.

Conclusion

Over the past year, the Canadian smartphone manufacturer’s stock gained more than 35% in value and this momentum is very likely to continue.

Bloomberg noted that BlackBerry Ltd is poised to beat the NASDAQ Composite Index this year, which will be the first time since 2009.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the BBRY Mar 2015 12.000 call (BBRY150320C00012000) at or under $1.00, good for the day. Place a protective stop loss at $0.40 and a pre-determined sell at $2.00.



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