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- Rubén Blades

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- Art Buchwald

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- Tyler Durden

"It is your corrupt we claim. It is your evil that will be sought by us. With every breath, we shall hunt them down."
- Boondock Saints

Sunday, March 23, 2014

BlackBerry Review

     GameStop and BlackBerry have earnings this week, 0830 on 03/27 and 0800 on 3/28 respectively.  In the interest of material presentation I'm choosing to do this one in writing instead of on CALtv, though I will try to get a video up this week for you guys on a different topic.  Side note:  thank you all very much for the support.  As the new content channel grows and I learn new ways to present my ideas and content through video, the experience will only improve for all of us.  I still want you to all to participate be it in the comment section on YouTube, here, or on Twitter.  Feel free to improve upon the files I share and help us build a community to help the new guys avoid the virtual signal newsletters pitfalls.  If you haven't already, please subscribe here and you will be notified when I add new video's and sign up for email on the right for notifications of new posts here and subscribe for updates to my Zero Hedge postings through your Account as shown here.

Now, let's get to the material you all have come here for.  There are a plethora of earnings this week and I used the Benzinga Pro calendar to filter through and find ones I have traded in the past or at least monitored at some point, as I do whenever I'm seeking trade ideas.  This is why I never accept trading tips from guys, not because I don't trust the messenger but because for my peace of mind and for my nature.  I trade equities and ETFs with order books I am comfortable with and that have pricing behavior that offers the return potential I require within my relatively "tight" time horizon.  With that said, I chose two stocks this week that present a challenge, to me, when formulating a view and that is why I choose to stick with these two, as a means to improve upon my ability regarding this trade direction "challenge". 

For me, the trade is going to be expected to be held or "managed" through profit taking or DCA for a 2-3 week period.  I typically trade the release and look to be either stopped out or cashed out within a week.  With GME and BBRY, both have conflicting price movement YTD compared with their headline releases and company activity.  I have not decided which one, if not both, that I will trade but I am going to choose one at least by the end of Monday.

Individual Performance & Key Year-To-Date Headlines
The next slide sums up my thesis along with the Last EPS reported and the Current Estimates as reported by Benzinga Pro's calendar.

What ought to stand out would be the BlackBerry target I have through my .xls file of $36.84.  BlackBerry is in no way expected to hit $36.84 any sooner than the Restoration Hardware $175 price target with no time expectation being promoted by signal alert salesman operating on State business loans that half forgiven.  However, BBRY does have activity support as shown by the VolumeProfile around the $10 and the $14 level on multiple time frames.  That is the boundary I'm looking for, with expectations of a swing or momentary pent-up volume trading it to $14.  

Capital-IQ Analyst Estimates.  NOTE: Toronto Exchange On Top (CAD Prices), NASDAQ On Bottom (USD Prices)

If BBRY comes in better than most of the street is expecting, we will see net-positive news articles being written with key words in headlines forcing headline-driven algo's to ignore the fact the firm may be losing money at a slower rate while potentially selling off assets and drive up the stock price all in the face of the fact that even management doesn't believe in the firm enough to expose themselves to ANY of the equity performance.

Management's mistrust does speak a material amount about their views...would you do something you didn't believe in enough to put your money at stake, thus exposing yourself to the value you believe you are capable of generating in an atmosphere where you're main goal is produce shareholder value (**cough** Hedgeye Real Time Alerts)?  Most likely, of course not.  But, most of us do know that managements can be fools sometimes and in the case of BBRY, most of these guys are probably adapting the "free-agent" perspective, thinking of themselves and what they can do to market themselves in the near future, as opposed to what is best for the team.

Looking at BBRY financials though over the past decade does show some improvement even as nearly everyone else has kicked the BlackBerry product to the curb.  BBRY's Receivables Period is dogshit, causing their Payables Period to be garbage also along with the destruction to the ever critical ROE, ROA, and Profit Margin metrics during 2013:

Data Source: Mergent Online, Yahoo! Finance, Reuters, Capital-IQ, US Treasury, CNBC, And Zack's Research

As traders and more importantly, computers, find BBRY on their radar when the headlines come out, most will be seeing ROE, ROA, Profit Margins and other crummy metrics for the first time.  So trading their reaction isn't my interest here.  I'm looking to capture the theoretical bullish move that I expect to come a few days after the release, when big money has had time to review and analyze the new financial position of BlackBerry.  Institutions own a heavy chunk of the BBRY Shares Outstanding:

Source: Capital-IQ
Model output price:

CalConfidence Calculated BBRY Intrinsic Price
Clearly that price is out of whack with reality.  Next up is a 2-Year Daily chart.  If you wish to regenerate what you see in the chart below on your ThinkOrSwim platform, click the hyperlink in a chart caption for the TOS share link and download the exact set-up to analyze yourself:

BlackBerry (BBRY) 2-Year Daily Chart
To Download To Your TOS Platform ---> http://tos.mx/WYLW7X
Note the VolumeProfile levels just above $10 and around $14.80.  That is where I will expect the asset to trade given the clear high volume activity at those levels, also note the gap between $12 and $14, that should provide a nice gap up if BBRY trades bullish after they report on Friday the 28th before market open.

Listen to the call here --> http://us.blackberry.com/company/investors/events.html

BlackBerry Excel link click here and then select download from the drop down in the upright of the page.

To view my write-up on GameStop, click here.