I am always amazed at how people psychologically value a stock based on its recent historical stock price performance. When Apple Inc. (NASDAQ:AAPL) traded at around $700 per share, many thought that it might reach $1,000 quite soon. The same thing happened with Research In Motion Ltd (NASDAQ:BBRY).
When Blackberry reached more than $150 per share in 2007, people estimated that it would keep going much higher. Interestingly, when Blackberry dropped to around $7 per share, Wall Street analysts were quite negative about the company.
BlackBerry 10 is getting user-friendlier
In the smartphone wars, Research In Motion Ltd (NASDAQ:BBRY) has lost when competing with Google Inc (NASDAQ:GOOG) and Apple due to its poor user friendliness and browsing inconvenience. However, it has begun to regain its customers after launching the new BlackBerry 10 operating system. There are several new features in BlackBerry 10, including BlackBerry Hub, BlackBerry flow and time shift, which could improve users’ experience significantly.
Furthermore, along with the new trend of “Bring Your Own Device to Work,” the BlackBerry balance feature could allow users to set up a firewall between work data and personal data. BlackBerry is well known for its high level of security. Indeed, BlackBerry 10 had won the certification for usage by government agencies before the launch.
More good news will come for BlackBerry Z10
Several days ago, Research In Motion Ltd (NASDAQ:BBRY) reported that it has received an order for 1 million BlackBerry 10 devices from one of its established partners, which could be considered the largest single order in BlackBerry’s history. The news led its stock price to jump by more than 8% to around $15.6 per share. In addition, AT&T Inc. (NYSE:T) will begin to offer the new BlackBerry Z10 on March 22.
In 2012, BlackBerry still ranked third in the smartphone operating system market with 4.5%. The biggest player is Google’s Android operating system, which has as much as 68.8% market share. Apple is standing in the second place with an 18.8% market share. It is hard to predict what the sales level of BlackBerry Z10 will be, but personally, I think that the BlackBerry 10 will help to improve the company’s market share.
Prem Watsa is still bullish about BlackBerry
Prem Watsa, the Canadian “Warren Buffett”, has been bullish about Research In Motion Ltd (NASDAQ:BBRY) for a long time. He mentioned that the BlackBerry brand name was perhaps one of the most recognizable brand names globally, with around 79 million subscribers worldwide. In the past 15 years, revenue has risen significantly, from zero to around $20 billion, and then “it hit an air pocket”.
Prem Watsa really believed in the comeback of BlackBerry, he wrote in his letter to shareholders:
“The brand name, a security system second to none, a distribution network across 650 telecom carriers worldwide, a 79 million subscriber base, enterprise customers accounting for 90% of the Fortune 500, almost exclusive usage by governments in Canada, the U.S. and the U.K., a huge original patent portfolio, an outstanding new operating system developed by QNX and $2.9 billion in cash with no debt, are all formidable strengths as BlackBerry makes its comeback!”
Prem Watsa is currently a 10% owner of BlackBerry at an average cost of around $17 per share, and he seems to be quite confident about BlackBerry’s management.
Peer comparison
At the current price of around $15 per share, BlackBerry is worth around $7.7 billion. It is cheaply valued at only 3.43 times EV/EBITDA. Google, at around $810 per share, has the total market cap of nearly $267 billion. Google seems to have the most expensive valuation at 14.2 times EV/EBITDA. Apple is the biggest company among the three, with $422 billion in total market cap. At $450 per share, Apple is valued quite cheaply at 6.12 times EV/EBITDA. Interestingly, Apple is the most profitable company with a 33.5% operating margin, while the operating margin of Google is only 26.7%. BlackBerry is generating losses.
My Foolish take
Personally, I think BlackBerry could move upward in the near future, as the market is still valuing it quite cheaply. The same conclusion could be applied to Apple. Apple is the most profitable company among the three but it is valued at only more than 6 times EV multiple. Google, despite a rich valuation, could be considered a long-term investment for patient investors.
The article BlackBerry Will be Tastier in the Near Future originally appeared on Fool.com and is written by Anh HOANG.
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