Analyzing Research In Motion Ltd (NASDAQ:BBRY)

Management

Blackberry’s executive team is putting it all out there and is really trying hard to save the company by releasing a new phone, changing the name, and advertising the brand. I don’t think it’ll work. The phone has nothing over the iPhone or Samsung’s Galaxy S3, the name change will cost huge amounts of money to market, and the brand is synonymous with old, cheap phones that very few people use. Management is trying, but to me it’s all over.

Valuing Blackberry

Blackberry is losing money, and quickly. Over the last 12 months, they’ve lost $846 million, with an EPS of -1.66. I would usually end the discussion right there, but let’s say that the Z10 actually does produce some sort of profit. I can’t even give it an actual growth rate because they’re losing more and more money every quarter, but for arguments sake I’ll throw around some numbers.

If Blackberry makes a huge recovery, and for arguments sake gets an EPS of $2, growing the company at 10% with a PE of 20 (historical average over the last 5 years) will yield a future stock price of $71.51 five years from now. Let’s keep in mind though, Blackberry isn’t making money, and it could be a long time until they get an EPS of $2, and growing the company at 10% is really just a guess cause again, they’re not making money.

So what’s the point? The level of uncertainty in the future of Blackberry should prevent anyone from becoming an owner. If the Z10 catches on, which I don’t think it will but if it does, and Blackberry starts making a profit, the current price point may be tempting. At $16 a share as of this writing, that will not last long if Blackberry does start earning a profit. Thanks for reading.

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The article Analyzing Blackberry originally appeared on Fool.com and is written by Alec Eiber.

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