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.

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 considered so you should 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

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

2 ‘irresistible’ FTSE stocks to buy before the market recovers!

For me, the FTSE is the most attractive index to invest in. Valuations are low and yields are high. So…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Is NIO stock a buy at $20?

NIO stock has been pretty volatile over the past few months. Here, Dylan Hood takes a look to see if…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

I’m buying more Lloyds shares at 45p! Here’s why

Lloyds shares look cheap to our writer at present. Charlie Carman outlines the factors behind his decision to invest more…

Read more »

Jumbo jet preparing to take off on a runway at sunset
Investing Articles

When will the Rolls-Royce share price recover?

The Rolls-Royce share price may be down, but cash flows are surging! Zaven Boyrazian explores how long it could be…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

1 dirt-cheap FTSE 100 stock I think could TRIPLE my money!

Demand for lithium is forecast to surge by 42 times, enabling this FTSE 100 stock to potentially supercharge its profits…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I invest in the FTSE 100 – or try to beat it?

Our writer has the option of investing in a FTSE 100 tracker fund. So why does he choose to buy…

Read more »

Young black woman walking in Central London for shopping
Investing Articles

£1,500 to invest in a Stocks and Shares ISA? Here’s how I’d do it

Our writer has been investing in his Stocks and Shares ISA. Here he details how he could put £1,500 in…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

2 top FTSE 100 shares I’d buy before the market rebounds!

Christopher Ruane identifies a pair of FTSE 100 shares that have both tumbled in the past year and that he…

Read more »