New BlackBerry Ltd. chief executive officer John Chen may believe reports of the company’s death “are greatly exaggerated,” but that hasn’t stopped investors from abandoning the smartphone maker’s stock.
BlackBerry shares touched a fresh 10-year low Tuesday for the fourth consecutive day, trading hands for as low as $5.44 (U.S.) a share on the Nasdaq. At that price, the stock was at its lowest level since September, 2003, and down 14 per cent so far this month.
The stock’s swoon suggests investors hadn’t fully priced in the bad news after the company’s largest shareholder, Fairfax Financial Holdings Ltd., abandoned a $9-a-share takeover bid for the company last month and instead led a $1-billion convertible debenture offering and ushered in Mr. Chen.
So what has changed in the past few weeks?
The minds of investors are likely focused on the company’s third-quarter earnings release on Dec. 20, which is expected to be ugly: Analysts polled by Bloomberg expect the company to lose 41 cents a share, down from a 2-cent profit in the same period a year earlier. Revenue is expected to decline by 42 per cent year over year to come in at $1.59-billion (and then fall by another 46 per cent in the fourth quarter from the year-earlier period) due to continued weak sales for the company’s poorly-received BlackBerry 10 smartphones. Even with that bleak forecast, don’t forget that BlackBerry has missed analysts’ consensus revenue estimates in five of the past eight quarters.
“The quarter is going to be a disaster,” said Kris Thompson of National Bank Financial, who noted the company is selling its real estate to shore up its cash. “The likelihood of a recovery is low. Tragic.”
Other contributing factors could be recent market surveys by comScore and Kantar Worldpanel that show BlackBerry’s smartphone market share has continued to deteriorate in the U.S. and Europe. In addition, the amount of shares held by short sellers – who are betting the stock will fall – is at its highest level since late June.
Canaccord Genuity analyst Mike Walkley had another explanation: The selloff is “very likely just year-end tax-loss selling” by fund managers, “year-end window dressing to get it out of funds, and maybe some selling ahead of what should be a very weak quarter.” Things don’t get much better in his view: Mr. Walker, who has a $6 target on the stock, estimates full-year revenue to hit $7.7-billion, down 31 per cent, and to fall by a further 43 per cent in the following 12 months.