BlackBerry stock rallies further on back of GME share price rise. Should I buy this US stock?

BlackBerry stock is enjoying a share price rally. Some good news warrants this, but GameStop’s short squeeze could also be influencing this US stock surge.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Kirsteen has no position in any of the shares mentioned. The Motley Fool UK does not own shares in any company mentioned.. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »