Blackberry (NYSE: BB) Stock is a Sleeper Opportunity

Blackberry Limited NYSE: BB shares have been doubled since its COVID-19 pandemic low of $2.70 on Mar. 18, 2020. This is far cry from the lofty heights of $150 price levels under the former name Research in Motion seen in 2008, but the company has undergone a full “below the radar” transformation. What was arguably the most dominant player in the smartphone industry has been minimized to rubble from the onset of competitors and years of patent infringement litigation. The company has reinvented itself as an enterprise software platform specializing in cybersecurity and artificial intelligence applications. It has also embarked on patent infringement lawsuits with various social media platforms including Twitter NASDAQ: TWTR and Facebook NYSE: FB. The combination of a strong balance sheet, potential jackpot from patent litigation settlements, and takeover speculation provides a potential sleeper buying opportunity at the right pullback entry levels for risk-tolerant investors and nimble traders.

The Fall Research in Motion

Blackberry was formerly known as Research in Motion (RIM) and was the undisputed leader in enterprise mobile smartphones in the early to late 2000s. They employed full touch keyboards enabling SMS and secure encrypted e-mails with that addictive “clacking” sound as users would wear out their thumbs endlessly clicking away at messages. Security was so strong that its handsets were the officially approved devices for various high-security clearance U.S. government agencies. Shares had traded up to $150s before the onset of the 2009 financial market meltdown ushering in the second bear market of the millennium. No one foresaw the leader in mobile smartphones being decimated by the entry the Apple iPhone NASDAQ: AAPL and overseas competition from Korea’s Samsung Electronics OTCMKTS: SSNLF . As Research in Motion (RIM), the Company fought a decade long battle with NTP, Inc. a patent IP portfolio litigation (aka patent troll) firm against key technology patents that RIM was ultimately found to have infringed upon. As RIM begrudgingly settled with NTP, Inc., they also decided to adopt NTP’s tactics as it pursued patent infringement claims against the largest social media messaging platforms Twitter and Facebook. RIM claims to have created the secure-messaging-system known as SMS and embarked on its own patent trolling journey to monetize its own patents worldwide.

Blackberry’s Resurgence

Fast forward to 2020, Blackberry has given up the handset market and reshaped itself as enterprise-level software and security play notably in the autonomous vehicle industry. The backbone of its QNX operating system is revered as one of the more secure application platforms in the market. The patent litigation continues along with takeover speculation. The Company has over $900 million in cash with 10% year-over-year (YoY) revenue growth and levered free cash flow of $114 million. Until the advent of COVID-19, the business was on an upward trajectory. Blackberry reported Q4 FY2020 earnings of $0.09-per share versus consensus analyst estimates of $0.04-per share, a + $0.05-per share beat. Revenues rose 13.2% YoY, but the Company had to pull guidance for FY2021 due to the pandemic. Recently, shares spiked on takeover rumors which were downplayed by potential suitor Fairfax Financial on June 2, 2020.

Opportunistic Entry Levels

Using the rifle charts on a monthly and weekly time frame provides a broader view of the landscape for BB stock. The monthly chart is in a make or break which means there is a stalled downtrend with a bullish stochastic mini pup targeting the 15-period moving average (MA) at $6.00. From there, a reversion is expected and ultimately the resumption of the downtrend if the 5-pd MA cracks under $4.74 or if the mini pup extends crossing the 5-pd MA up through the 15-pd MA for a breakout and trend reversal. The monthly make or break will take many months to resolve. However, opportunistic pullbacks can be taken as smaller time frames exhaust. The weekly rifle chart triggered a market structure low (MSL) above $4.18. The weekly stochastic triggered bullish mini pup that spiked shares up to the 5.54 Fibonacci (fib) level. It’s prudent to wait for opportunistic pullbacks at these key levels: $4.85 fib, $4.18 weekly MSL trigger/fib and $3.74 fib. Nimble traders can trade the fib inflection points on the chart. Longer-term investors can look to scale in with a pyramid style allocation model (light to heavy as prices fall) to average in a solid position at better prices. If the weekly mini pup plays out as anticipated, then BB shares have an upside towards the $7.24 upper Bollinger Bands (BBs) and $8.86 gatekeeper fib and $11.04 monthly upper BBs.