BlackBerry (NYSE:BB), the iconic brand and forerunner to the smartphone, has had a tough few years. In 2008, the BlackBerry share price was trading as high as $145 a share, but by 2012 had spectacularly fallen from grace. In the 2020 March market crash, it fell below $3.
However, in the past two months, it has made a remarkable comeback. At the time of writing, Blackberry shares are trading at $22. So, does this mean it’s now a ‘must-buy’ tech stock with an exciting future ahead? Let’s not get ahead of ourselves.
Blackberry stock rallies
Nowadays, BlackBerry is a software security firm rather than a smartphone manufacturer. Security is an increasingly vital part of our world, so there’s a clear need for such an offering. And, in the past few weeks, a few newsworthy announcements have helped to boost the BB share price.
In December, BlackBerry announced a joint venture with Amazon Web Services to develop a cloud-based platform for the auto industry. Shareholders welcomed this news. Then, earlier this month, a lawsuit between Facebook and BlackBerry was reportedly settled, which helped to boost sentiment around the share.
Shortly after, the company announced it had sold 90 smartphone patents to Huawei Technologies. This made an exciting development, as Blackberry reportedly has around 38,000 patents in its library. The announcement of a partnership with Chinese search engine Baidu in relation to electric vehicle tech followed.
While all these news items gave an understandable boost to the BB share price, the extent of the rally, up 220% in a month, is surprising analysts and investors alike.
Are these shares rising in a short squeeze?
On Monday, a news release stated BlackBerry didn’t know of any reason for the recent share price rally. However, there’s speculation it follows on from the incredible story of GameStop’s (NYSE:GME) meteoric share price rise.
The GME share price rise over the past few days has been gripping to watch. Reportedly over 2m amateur investors on a Reddit board called wallstreetbets banded together to buy up shares in the ailing video game store and squeeze out the hedge funds betting against it.
Robinhood is a popular retail investor app used for buying and selling shares in the US, and many of these amateur investors use it. GameStop stock has risen over 740% year-to-date, mirroring a Robin Hood tale of stealing from the big bad hedge funds to feed the poor. Some investors involved have reportedly transformed tiny sums of money into life-changing returns. However, the conspiracy theories on social media are running wild and now its share price has gone so high there are concerns the U.S. Securities and Exchange Commission (SEC) will step in to halt the action.
In the midst of the mayhem, investors’ set their sights on additional shares to buy, one of which appears to be BlackBerry. That’s because it’s another share with a high number of shorts, (hedge funds betting against it). This helps explain why BlackBerry stock has rallied to such an extent.
As exciting as it is to witness, BlackBerry shares are not a viable buy for me at today’s price. The price-to-earnings ratio and earnings per share are negative, and it doesn’t offer a dividend. The excitement around these shares is unlikely to last and may even result in legal intervention. Hopefully, it will not lead to too many casualties.
