BlackBerry (TSX:BB) Surges in Short Squeeze 2.0!

BlackBerry (TSX:BB)(NYSE:BB) stock is in the midst of its SECOND big rally of the year.

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BlackBerry (TSX:BB)(NYSE:BB) stock is on the rise again. Following a surge in mentions on Reddit and Twitter, it rose 12% in a single trading day. It looks like the meme stocks are rising again. Not only is BlackBerry rising, but Gamestop is closing in on its all-time high as well. In this article, I’ll explore BlackBerry’s latest surge and whether a “new short squeeze” could be in the works.

Reddit bullish again

It’s apparent that Reddit is turning bullish on BlackBerry again. On Wednesday, BB was the fifth-most popular stock on Reddit followed by the usual meme suspects like Gamestop and AMC. According to at least one source, BB was the most mentioned stock on Twitter for one day, although that appears to have tapered off.

Another short squeeze?

With BB rising as much as it has been, there may be another short squeeze in the works.

According to ShortData.ca, 14% of BlackBerry’s trading volume on June 1 was sold short. That’s a pretty high percentage of trading volume, although BB didn’t crack the site’s top 10 list of TSX stocks by short volume. Nevertheless, we’ve got a fairly sizable contingent of BB shorts who could get squeezed. Just a few weeks ago, BB was trading for only $9.7. If the WallStreetBets momentum continues, it could climb to $20. At that point, shorts who borrowed at $9.7 would have to pay back twice what they borrowed. Covering at losses would be a very real possibility.

What about the long run?

As we’ve seen, BlackBerry has been very bullish lately.

But what about the long run? Can BlackBerry actually keep this momentum going over a period of years rather than weeks? If so, what are the reasons for thinking it could do so?

As 2021 has shown, Reddit has the power to ignite quick, sharp rallies in stocks. But if the January/February meme stock craze is any indication, these things can come crashing down very quickly.

As far as BlackBerry is concerned, its current rally is not well supported by the business’s actual results. In its most recent quarter, the company saw its revenue decline 34% year over year and posted a $313 million loss. These aren’t good numbers. If this trend continues, then BlackBerry stock will likely start falling again. However, BB does have some genuinely good things going for it, like new contracts with Chinese automakers and a business relationship with Amazon. These are very promising “operational” developments, but it’s inescapable: BlackBerry’s most recent financial results were not good.

Foolish takeaway

What a strange year it has been for BlackBerry.

After rising to a multi-year high and then crashing, it has risen again. None of this — the first rally or the current one — has had much to do with the company’s actual performance, but that hasn’t stopped Reddit. It looks like we’re in the “Meme Stocks 2.0” rally, where Reddit is once again driving stocks with sentimental, nostalgic value to new highs. Whether there will be another short squeeze remains to be seen. But if there is, then Wall Street will eat crow once again.

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 Andrew Button has no position in any of the stocks mentioned. David Gardner owns shares of Amazon and GameStop. Tom Gardner owns shares of Twitter. The Motley Fool owns shares of and recommends Amazon and Twitter. 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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