Is BlackBerry Stock Oversold?

With shares of Blackberry (NASDAQ:BBRY) trading around $8, is BBRY an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

BlackBerry is a designer, manufacturer, and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software, and services, it provides platforms and solutions for seamless access to information such as email, voice, instant messaging, SMS, Internet, intranet-based applications, and browsing. Its products and services feature the BlackBerry wireless solution, the Research In Motion Wireless Handheld product line, the BlackBerry PlayBook tablet, software development tools, and other software and hardware.

BlackBerry's latest desperate move involves taking out newspaper ads in an attempt to soothe investors and the few people who still use the company's devices that everything will be all right, Bloomberg reports. The full-page ads, which have been appearing in newspapers around the world, are in the form of an open letter. "These are no doubt challenging times for us and we don't underestimate the situation or ignore the challenges. We are making the difficult changes necessary to strengthen BlackBerry," BlackBerry says in the ads, which are meant to communicate with customers directly.

T = Technicals on the Stock Chart Are Weak

Blackberry stock has been struggling over the past several years. The stock is currently trading near lows for the year as it continues to digest negative news. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Blackberry is trading below its key averages, which signals neutral to bearish price action in the near term.

Source: Thinkorswim

Taking a look at the implied volatility and implied volatility skew levels of Blackberry options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Blackberry Options	68.80%	16%	14%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
November Options	Steep	Average
December Options	Steep	Average

As of Tuesday, there is average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bearish over the next two months.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Blackberry’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Blackberry look like and, more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	-308.89%	83.84%	178.41%	-96.08%
Revenue Growth (Y-O-Y)	-45.02%	9.37%	-35.97%	-47.21%
Earnings Reaction	-0.99%	-27.76%	-0.89%	-22.73%

Blackberry has seen mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have been disappointed about Blackberry’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Blackberry stock done relative to its peers – Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), and Nokia (NYSE:NOK) — and sector?

	Blackberry	Apple	Google	Nokia	Sector
Year-to-Date Return	-32.5%	-6.28%	24.72%	74.94%	16.22%

Blackberry has been a poor relative performer, year-to-date.

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide. The company is reportedly making desperate moves in order to ease investor concerns. The stock has struggled to make positive progress in recent years and is now trading near lows for 2013. Over the last four quarters, earnings have been mixed while revenues have been decreasing, which has left investors disappointed about recent earnings announcements. Relative to its peers and sector, BlackBerry has been a weak year-to-date performer. STAY AWAY from BlackBerry for now.