BlackBerry stock (NYSE: BB) rallied by over 30% over the last five trading days, significantly outperforming the S&P 500 which has remained roughly flat over the same period. The rally appears to be driven by trends similar to what we witnessed this January, as groups of retail investors doubled down on small and mid-cap stocks with a high level of short interest, in order to set off sharp price increases and put pressure on short-sellers. BlackBerry – with a near single-digit stock price – and short interest of almost 10% is likely to have been a beneficiary. Now, is BlackBerry stock set to rally further or should we expect it to correct from current levels? We believe that there is a strong chance of a decline in BlackBerry stock over the next month (twenty-one trading days) based on our machine learning analysis of trends in the historical stock price. See our analysis on BlackBerry Stock Chances Of Rise for more details.
We also think the longer-term outlook for BlackBerry stock is tough. BlackBerry plays in some very high-growth markets, including automotive software and cybersecurity, and has made multiple strategic acquisitions and forged many high-profile partnerships. However, competition in these markets is intense and BlackBerry’s execution thus far has been lackluster. Revenues have declined almost consistently over the last decade and are poised to fall again by 10% this fiscal year. Meaningful profitability is also not looking likely in the near term. BlackBerry’s valuation appears high relative to historical levels, with the stock trading at almost 8x forward revenues, compared to levels of just over 3x at the end of last year.
Looking for reasonably valued software stocks with big room to grow? Check out our theme on Mid-Cap SaaS Stocks