Ignore Market Trepidation, the Research In Motion Ltd (BBRY) Redux Is Working

The QWERTY-keyboard equipped Q10 is a combination of the company’s latest software efforts with its core, loyal user base preference. Even though the majority of smartphone makers are touchscreen-only, there are still consumers who need the tactile response of a physical keyboard. These users have been BlackBerry fans since the beginning, and are an incredibly important group to satisfy. The Q10 has the potential to be the market leader in the keyboard-lover demographic. This would be a major victory for BlackBerry — regardless of how small that demographic is compared to the entire market.

The second metric to keep an eye on is marketing spend. Management expects a 50% increase for this quarter, directly from the launch of these new phones and the 100,000-strong app market. BlackBerry needs heavy marketing to give the phone a fighting chance against Apple and Samsung. But investors need to make sure this effort yields attractive returns. In the next earnings release, compare the increased marketing spend to sales figures. Even though net earnings will likely come in at breakeven, given the marketing expense, it will be a major success if this push yields big-time sales gains.

Valuation and the call
At nearly $14.50 per share, Research In Motion Ltd (NASDAQ:BBRY) is twice what it was a year ago, when I first publicly expressed my bull call. That gives today’s market cap of $7.55 billion. With nearly $3 billion in cash and equivalents (and zero long-term debt), that gives a value to the operating business of $4.5 billion –only 1.67 times fourth-quarter sales. Last quarter was a mix of new product cycles in some regions and the end in others. This coming quarter will show the first full result of the new products across all regions, which I believe will show big gains in subscribers and hardware sales.

The company isn’t as cheap as it was 12 months ago, but there is plenty of upside potential here. The comeback is yet to be guaranteed, and there is a reasonable amount of downside risk, but this may be one of the last chances to buy at fundamentally cheap prices before the market at large determines BlackBerry to have returned to growth.

The article Ignore Market Trepidation, the Blackberry Redux Is Working originally appeared on Fool.com.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple.

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