The market has been losing momentum lately and so has BlackBerry (NYSE:BB). BB stock has become a favorite among the “Reddit traders,” the short-squeeze traders or whatever else they want to refer to it as.
It’s simple, though. With a few exceptions, stocks like GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC), Aterian (NASDAQ:ATER) and others have been screaming to the upside. Some days there is news to generate the move. Sometimes there is not.
In the case of BB stock, we saw the stock rally from $6.50 in early January to almost $30 by the end of the month, a move of 341%. From the low on May 13 to the high on June 3, we saw BlackBerry surge 162% from $7.70 to just over $20.
Why? There was no real fundamental driver for these moves. The company didn’t report robust earnings or provide an update that generated a substantial shift in the fundamentals to justify such a move. Instead, these phantom short-covering rallies have shown up in dozens of stocks. Can another one save the faltering price action in BlackBerry?
Trading BB Stock
A glance at the chart doesn’t inspire much confidence. For most of the year, BlackBerry has spent its time chopping between $8 on the downside and $12 on the upside. For a cheap stock like this, that’s actually a pretty nice trading range.
Of course, the stock has seen some massive short-squeezes to the upside, even though those moves have been short lived.
However, the recent developments have been less appealing.
After being rejected from the $12 level, BB stock failed to hold its key moving averages, then failed to hold $10. It rolled over on Monday Sept. 20, and is now failing to hold the 50-week moving average.
While there is a layer of uptrend support just below current prices, I wouldn’t bank my life savings on that mark holding. That’s particularly true as so many other key levels failed to do so.
In any regard, the stock is working with a monthly-down rotation so long as it is below the August low of $9.48. Below that mark and it’s hard to be long BB stock. It opens the door for lower prices, specifically to $8, should uptrend support fail.
Should BlackBerry start to squeeze higher, the levels to watch are simple. First, watch the 200-day and the stock’s cluster of key moving averages. Above that puts $12 in play, then the $14 area, where BB stock finds its daily and weekly VWAP measures for those massive spikes.
Short of some type of upward squeeze, BlackBerry is not one that looks very attractive at the moment. Keep an eye on $9.48.
Breaking Down BlackBerry Stock
Not many companies get a second chance at life after getting steamrolled on the first. But that’s what we’re seeing with BlackBerry. The company was sitting atop the smartphone market until Apple (NASDAQ:AAPL) came in like a wrecking ball.
However, BlackBerry was always pretty good with software and security, a niche it has now carved out into a nice business. It licensed off its handset business and is now focused strictly on recurring revenues and software sales. Specifically, it’s generating traction in the auto sector.
Current-year (fiscal 2022) estimates call for a roughly 15% decline in revenue to about $765 million. Analysts also expect a loss for the year. That’s not helping the stock’s lousy technicals.
However, next year should be better (fiscal 2023). Analysts predict a slight profit per share and 25% revenue growth to $940 million. That’s got the $1 billion mark within reach. In fact, the highest estimate among the analyst community is for $1.03 billion.
Should BlackBerry deliver, we could see a nice pop in BB stock.
However, a pop is all that may materialize, because fiscal 2024 is the big wild card. Analysts expect revenue to fall again, back to down to $860 million. If BlackBerry can find a way to stabilize revenue — even keeping it flat year over year — while bolstering its bottom line and cash flow, then the stock may have some real upside potential.
Bottom Line
For now, we’re going to let the technicals guide us. While BlackBerry does have some potential here going into fiscal 2023, we’re only one quarter of the way through fiscal 2022.
Without the technicals flashing a bullish sign, it’s hard to be long BB stock. However, watch for a turn in the fundamentals, which could help lead the way to a better technical setup.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.