BlackBerry’s (BB) (BB.TO) stock was up nearly 40 per cent at the start of Monday’s trading session, and analysts say it is a reflection of investors seeing potential growth opportunities from recent announcements.
The stock closed at $22.92 in Toronto, a gain of 28 per cent.
Gilbert Enenajor, director of research at Strategic Analysis Corporation, said the surge in BlackBerry’s stock can be attributed in part to the strategic shift to cybersecurity and the Internet of Things.
“It’s been making a shift away from the handheld devices, and so what really is happening, is the market is cheering this new shift of BlackBerry away from its old business model and what it’s doing now,” he said in an interview.
“People are now starting to see the potential for the company, however, it might be a little over-exuberant.”
Enenajor added that the partnerships with Amazon Web Services in December to use its cloud services, as well as its recent patent settlement with Facebook are acting “as a catalyst to awaken the long-dormant stock.”
But he noted that because of market dynamics it will be hard to sustain growth like this over a long period of time.
On Jan. 25, BlackBerry announced it was “not aware of any material, undisclosed corporate developments and has no material change in its business affairs that has not been publicly disclosed that would account for the recent increase in the market price or trading volume of its common shares.”
Benj Gallander, a BlackBerry shareholder and president of Contra The Heard Investment Letter, agreed with Enenajor and added that the recent news is why the stock is doing so well.
“That is definitely news,” he said. “I believe BlackBerry holds more patents than any other company in Canada. That also puts [them] front and centre, they have definite value again.”
Gallander added that the surge of traders on trading apps like Robinhood can’t be ignored as a factor in what is boosting the value of BlackBerry’s stock.
“A lot of small-fry traders who get really excited about things tend to jump on stocks that have been doing well. They look to ride the momentum for good gains,” he said. “The internet I think is a definite factor.”
Enenajor added the company has also become a “darling” of the “Robinhood crowd.”
Robinhood said as of last May, it had nearly three million users year-to-date. In Canada, a survey of retail investors by the website TradingView conducted earlier this month found 62.5 per cent of respondents said they’re trading more because of the pandemic.
“Whether or not this price action is based on a real shift in the fundamentals of the business is yet to be determined, but in the past, a frenzy of retail interest has often been a telltale sign of a speculative bubble,” he said.
Amid the surge in BlackBerry’s stock, Gallander said many shareholders have sold shares in the past couple of weeks, including insiders. BlackBerry Chief Marketing Officer Mark Wilson sold 78,500 shares, and Chief Financial Officer Steve Rai sold 32,954, according to Reuters.
“A number of insiders have been selling and they’ve been selling a lot of stock,” Gallander said. “They’re definitely looking to monetize some or all of their holdings.”
With files from Reuters