The holiday season is here, investors are selling stock to have money for taxes, and people are shopping like mad to get gifts for their families. But this holiday season is also one of the best times to start a position in BlackBerry Ltd. (TSX: BB)(NASDAQ: BBRY).
The company has been hurting for many years now, but there are five things that are going to come together to create the perfect opportunity for BlackBerry investors to make money in the short term and long term.
1. Surprise Q3 results?
All along, CEO John Chen has urged us to be patient. He has made necessary moves to clean the company up and streamline it, but has operated on an under-promise and over-deliver mentality. Whereas other CEOs make their company sound like the best thing in the world, he’s more tempered.
Because of that, I think the third quarter is going to rock. The primary reason for this is speculation by some investors that the Passport has sold far more units than previously anticipated. That could lead the company to generate positive cash flow, something it hasn’t done in a while. That would send the stock flying.
2. Phone sales
Delving deeper into phone sales, it’s important to understand a few things. First, at the end of the last quarter, the Z3 wasn’t completely rolled out. Second, the Passport didn’t really exist. And finally, the Classic, its newest phone, wasn’t even announced. Therefore, there are three phones that are out now generating revenue.
Then there’s the fact that they are having sales targeted at iPhone users, making it very easy for the user to switch to BlackBerry. That could really be a coup for the company.
But it’s the fact that BlackBerry is selling the Passport in other colors that makes me believe phone sales are off the charts. You don’t start selling—and manufacturing—new color devices if the first one isn’t working. It’s an increased cost that BlackBerry can’t afford.
3. Software is on the rise
There’s no denying that BlackBerry needs to generate money from other parts of the company. It can’t be entirely reliant on its hardware division.
Because of that, the company rolled out BES 12, which combines both BES 10 and BES 5. This is the secure, enterprise software that the company needs to generate money. And it’s also the type of software many different companies want. Samsung is one. Enterprise customers will be able to have BES 12 on their Galaxy devices. That’s end-to-end security.
4. Internet of things
One tech CEO argued that the Internet of Things could be a $19 trillion market. In essence, every device is connected together. But to do that will require very secure operating systems.
BlackBerry happens to own one and it’s called QNX. It’s already the operating system for some cars, but I imagine it will expand into other markets over the next five years.
5. Shorts are getting nervous
This is the short-term gain. Interest in shorting BlackBerry is obviously very high, passing over 100 million shares in October. However, it’s been starting to drop because some believe the 3Q will be strong. If that happens, they’ll get pinched while trying to cover their position.
That means they’ll have to buy BlackBerry at an even higher price to get out of their short, but that’ll send the stock flying. If that happens, you can continue to hold or take your profits, wait for the stock to drop again, and then enter again.
Because of this, I believe BlackBerry should definitely be in your portfolio. But there are also other companies I think belong there.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Jacob Donnelly has no position in any stocks mentioned.