While speaking at a tech conference in late October, reality TV actress Kim Kardashian expressed support for BlackBerry Ltd. (TSX:BB)(NASDAQ: BBRY), saying “I’m afraid [the company] will go extinct. I’m on a mission to make that not happen.”
Kardashian is so addicted to her BlackBerry Bold that she owns three in total, just in case one breaks. She is that paranoid about losing her beloved phone. When asked what she liked about the device, she responded “A BlackBerry, it’s my heart and soul. I love it. I’ll never get rid of it. I do have an iPhone – I use that for photos – but if you have to handle an e-mail and you have to type fast I need to feel that board.” The board she’s referring to is BlackBerry’s physical keyboard, the company’s trademark.
BlackBerry got another celeb shout-out that same week, when BNN commentator and former Dragon’s Den star Kevin O’Leary professed his love for the new Passport. O’Leary, who recently started to use a Passport said “I have to admit, for enterprise work, calendaring, contacts, and email, there is nothing better.”
Celebrity endorsements are obviously good news, but do they mean you should rush out and buy BlackBerry? Of course not. But when you combine the endorsements with other reasons to buy the stock, they combine to make a pretty compelling argument. Let’s look at some other reasons why you should be bullish on 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 stellar 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. While I think that’s 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.
The bottom line? Kim Kardashian doesn’t have to worry. BlackBerry isn’t going anywhere. In fact, it’s a lot closer to success than most investors are willing to give it credit for.
