BlackBerry (TSX:BB): Should You Buy the Parabolic Rally?

BlackBerry (TSX:BB)(NYSE:BB) stock continues its incredible rally, but will it too late to get in with the latest pop off minimal news?

| More on:
question marks written reminders tickets

Image source: Getty Images

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 (TSX:BB)(NYSE:BB) stock’s recent parabolic surge has been nothing short of unprecedented. The initial rally was sparked by incredibly good news, most notably the announcement of a collaboration with Amazon.com Web Services (AWS) on its ambitious project IVY. Then shares went bust before their next leg higher on the back of more good news (patent sales to Chinese telecom behemoth Huawei and a dispute settlement with Facebook).

Most recently, BlackBerry stock popped over 28% in Monday’s trading session with no real good news. While the initial IVY news deserved to be a major needle mover on BlackBerry stock, I thought the subsequent “good” news announcements were less than compelling. Make no mistake; the sale of 90 patents to Huawei and a dispute settlement with Facebook were both great pieces of news for BlackBerry. But should they have helped fuel BlackBerry’s latest run past the $22 mark? Or could the speculative frenzy have spread to BB stock?

How high can BlackBerry shares fly?

Whenever you’ve got a stock that’s building momentum like a snowball rolling down a hill, investors need to start asking themselves questions. Are investors now chasing the name while neglecting valuation? Or has the recent slew of good news caused the much-anticipated re-valuation of BB stock to the upside?

In numerous prior pieces, I’ve highlighted BlackBerry as a deep-value stock that was too cheap to ignore. Before the latest bounce, the stock traded at around two times sales, which I found to be absolutely ridiculous for a tech stock that provided investors with a front-row seat to some of the hottest tech sub-industries like cybersecurity and the Internet of Things (IoT), hot areas of the market that I thought most other investors would be willing to pay a price-to-sales (P/S) multiple that was multitudes higher.

While the latest parabolic move in BlackBerry stock has a lot of euphoria baked in, I still don’t think shares are as expensive as they could be. Only time will tell if the 280% multi-month surge is a sustained re-valuation or just a short-lived boom that’ll be followed by a vicious retracement.

Despite the reasonable valuation (shares still trade at under 10 times sales), I think BlackBerry stock has become too risky to hold for investors who aren’t willing to put up with extreme levels of volatility. At the same time, there’s no telling just how much BlackBerry shares can run. If sell-side analysts, most of whom have “hold” ratings on the name, start playing “catch up” with price target hikes, shares could blast off further.

High reward, higher risk?

If Tesla and Bitcoin can soar above and beyond even the most bullish of estimates, so too can BlackBerry. As such, I’d urge investors who’ve doubled up to play with the house’s money. By taking the principal off the table, you can keep playing the game without running the risk of losing your shirt.

In any case, it seems like BlackBerry insiders are more than willing to take a bit of profit after BB stock’s historic rally. If you don’t already own shares, I’d only nibble if you’re keen on chasing the name. Just be aware of the risks and the magnitude of downside (double-digit percentage daily moves) you could be faced with if things take a 180-degree turn.

Personally, I’ll be enjoying the show safely from the sidelines, as the risk of a near-term retracement is too high for my liking.

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.

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. Fool contributor Joey Frenette has no position in any of the stocks mentioned. David Gardner owns shares of Amazon, Facebook, and Tesla. Tom Gardner owns shares of Facebook and Tesla. The Motley Fool owns shares of and recommends Amazon, Facebook, and Tesla. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.

More on Tech Stocks

young woman celebrating a victory while working with mobile phone in the office
Tech Stocks

3 Growth Stocks Trading at a Massive Discount Right Now

Canadian growth stocks such as Shopify have the potential to deliver market-beating gains to investors in the next year.

Read more »

analyze data
Tech Stocks

Got $5,000? 3 Stocks to Hold for the Next 20 Years

Do you have $5,000 you’re looking to invest? Here are three stocks worth holding for the next 20 years!

Read more »

You Should Know This
Tech Stocks

Why BlackBerry Stock Dived 25% Last Quarter

Despite its recent big losses, BlackBerry stock has the potential to yield outstanding returns in the long term.

Read more »

Dollar symbol and Canadian flag on keyboard
Tech Stocks

3 Top Canadian Growth Stocks to Buy in July

Here are three growth stocks you might want to add to your buy list in July.

Read more »

Various Canadian dollars in gray pants pocket
Tech Stocks

2 Ultimate Growth Stocks to Buy Below $50

These under-$50 stocks have multiple growth catalysts that point to a steep recovery.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

This 1 Tech Stock Has Surged 50% in the Last 2 Months: Should You Buy?

While the entire tech sector is in a selloff, one Canadian tech stock has jumped 50% in two months. Is…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

3 Growth Stocks Worth Buying if You Can Handle Volatility

Are you an investor that isn’t scared of a little volatility? Here are three top picks!

Read more »

edit U-turn
Tech Stocks

Can Shopify (TSX:SHOP) and Lightspeed (TSX:LSPD) Recover Before 2023?

Shares of these omnichannel commerce-enabling companies are down over 80%, creating a solid buying opportunity.

Read more »