Is the Reddit WallStreetBets Trade Over for BlackBerry?

BlackBerry (TSX:BB)(NYSE:BB) continues to be a top pick for the WSB crew — is this trade over?

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One of the most discussed stocks on the TSX right now is BlackBerry (TSX:BB)(NYSE:BB). BlackBerry’s parabolic move in recent weeks has driven a tremendous amount of interest. This company is one with a tremendous amount of retail support right now. Indeed, BlackBerry is one of the most discussed stocks on the Reddit “WallStreetBets” forum.

BlackBerry is a stock which has had a high level of short interest in recent years. Accordingly, investors focused on squeezing short-sellers have targeted BlackBerry. BlackBerry also has some tremendous long-term catalysts investors think could take this company higher. This mix has produced a “perfect storm” of sorts for this stock in recent weeks.

However, as many investors may have noticed, BlackBerry shares have dropped precipitously since its peak of $36 on Jan. 27. Many are now asking: Is this trade over?

Good news has underpinned this rise

Fellow Fool contributor Joey Frenette thinks the trade might not be over for BlackBerry. He wrote: “BlackBerry stock, while a less-shorted stock than other names on WSB’s radar, I believe, is the riskiest short of all WSB stocks following the stock’s recent implosion. Why? BlackBerry has enjoyed a slew of good news of late. And such good news items, I believe, actually improves upon the firm’s fundamentals.”

I have to agree. BlackBerry’s recent deal with Amazon has provided a solid growth thesis for this former TSX tech superstar. This news isn’t minor for BlackBerry shareholders. Investors have been waiting for such a catalyst to materialize for some time. Growth expectations are starting to improve around BlackBerry’s QNX and IVY platforms. Accordingly, I think a significant portion of this recent stock price spike is warranted.

Bottom line

BlackBerry stock isn’t likely to experience a short squeeze similar to other Reddit targets. The level of short interest in BlackBerry simply doesn’t cut it. Those hoping for another November-like spike are likely to be disappointed in the near term. In that sense, I think the Reddit trade is likely over.

That said, I don’t think all the retail investor optimism around this stock is unwarranted. For longer-term investors, I think BlackBerry’s investment thesis has improved substantially. BlackBerry’s turnaround from a hardware company to a pure-play software business is complete. This is a company with the potential to start to provide the kind of software-like returns growth investors have clamored for in recent years.

I think there are plenty of great tech companies on the TSX right now. However, I think BlackBerry stock provides some serious speculative upside for long-term growth investors.

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. Fool contributor Chris MacDonald has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. 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.

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