Many are pulling away from BlackBerry (NASDAQ:BBRY) after a relatively dismal year in which the company posted losses of $4.4 billion. Its stock value had correspondingly fallen 70% from its peak of $18.32 to a 52-week low of $5.44. This has understandably caused a lot of anxiety in current and potential investors. However, these uninspiring numbers are not the whole story and do not necessarily spell the end for BlackBerry.
The company has responded to declining profits by making some important changes in leadership and business focus. The most significant of these changes in leadership was bringing in Chen as the new CEO. He has a track record of turning around struggling companies and has made it clear that he plans to shift the company’s emphasis toward enterprise and security — two of Blackberry’s stronger points.
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- BBRY 15-Year Financial Data
- The intrinsic value of BBRY
- Peter Lynch Chart of BBRY
Plans for change alone are not sufficient to rate BlackBerry a buy, however. The numbers need to show some cause for hope in spite of the recent downturn.
The Balance Sheet:
As of the end of 2013, BlackBerry’s total assets are at $13.53 billion which represents an overall upward trend over the past five years. Of the company’s assets, $1.59 billion is in the form of hard cash. Despite the losses posted over the past year, cash holdings have remained stable and, in fact, are slightly higher than they were in 2012.
And even taking the decline of 2013 into account, the company still has an average net profit margin of about 5.87% which is a promising sign and could be indicative of the company’s ability to bounce back from a bad year.
It also hasn’t been taking on an unhealthy amount of debt over the past five years. Its total liabilities are only at $3.81 billion which is manageable for the company’s size. With a debt to equity ratio of 24.66%, there’s no reason to fear the company going under from inability to pay off its debts.
BlackBerry in the Stock Market
The value of BlackBerry’s stock was at $7.44 as of yesterday’s (Jan. 1, 2014) close. Although this is still a far cry from its 52-week peak of $18.32, it does represent a month-long recovery coming shortly after the launch of its new BlackBerry Messenger (BBM) application for iPhones and Android devices.
In the wake of such dramatic decline in 2013, many analysts have cautioned against investing in BlackBerry, effectively turning it into an underdog. But for those ready to take the risk, this stock has the potential to double your investment in the coming year.
Blackberry in 2014
With such grim reports and so many warning against it, what could possibly be left to save the company? In short, the new CEO John Chen. There is a lot of potential in his plans to shift the focus of BlackBerry and move away from the consumer market where it would never be able to outperform competitors' products like the iPhone (NASDAQ:AAPL) or Android (NASDAQ:GOOG).
The CEO is optimistic about the future of the company and points to BlackBerry’s strong financial position and his plan to focus on the company’s strong points in defense of his optimism. And Chen is not alone in his positive outlook for the future of BlackBerry. The company has raised $1 billion in investments and attracted large purchases of its stock showing that many still have faith in BlackBerry’s ability to pull through this financial hardship and make a comeback in the coming year.
Without a doubt, BlackBerry has had a pretty tough year as it continued to be overtaken in the consumer market by its competitors. If the company had continued to operate under the old leadership, there might not even be a stock left to talk about.
But, thankfully, BlackBerry took this grim year as a wake up call and realized it was time for a change. John Chen stepping into the CEO position was cause enough for optimism as he has already proven successful in returning struggling technology companies to profitability.
The good news does not end there: These next couple of months will be witness to a restructuring of the company’s focus on efforts toward its still profitable products and services (namely in the enterprise and security markets).
Buying BlackBerry stock now in anticipation of these changes could result in a doubling of your investment as the company is poised and ready to soar in the coming year. There is certainly some risk inherent in the investment, but with the risk comes a great potential for reward.