One of the biggest losers today is Research In Motion (BBRY), the company once synonymous with smartphones and mobile email. Since the introduction of the iPhone, Blackberry has seen its marketshare squeezed by Apple (AAPL) and Samsung, but hope springs eternal and the company’s stock has risen on hopes several times since the middle of the last decade.
Most recently, hopes hinged on the Q10 and Z10, devices that were set to expand the company’s marketshare thanks to better tech, features, and interfaces. Before trading Friday, the company announced a surprise loss that has caused the company’s shares to fall nearly 30% in intraday trading.
The Hope
The hard drop is due to some high hopes that had caused a tremendous run-op in the stock before today. From the middle of April, the stock rose to flirt with the $15 price point just before today, buoyed in no small part to analyst upgrades. A great example is in this article, where a Jefferies analyst announced a confident expectation that BBRY would surprise on earnings, causing the stock to go up. To make a long story short, the Jefferies analyst expected sales to be up 24% year-over-year, compared to guidance of 13%.
Another analyst at BGC Partners was expecting EPS of 7 cents and $3.44 billion in revenue. While many analysts on Wall Street weren’t projecting actual EPS or revenue expectations, the clear sense was that we would see strong sales growth in a sign that the company’s new products had found a niche, and would save the company.
The Flop
In reality, the company’s revenue rose 9.3% and adjust EPS was a loss of 13 cents per share. Yes, that is top-line growth, but far too low and far beyond the market’s expectations. The implication of this is clear: Blackberry’s new products aren’t good enough to compete with iOS and Android alternatives.
The results were disastrous; despite a growing momentum of positive expectations, the company failed to deliver and saw its stock crash nearly 30% in pre-trading hours shortly after the earnings call. In the morning, the stock was still looking at about a 25% fall.
How to Find Out
The problem, of course, is that we only know of Blackberry’s disastrous sales now, after the earnings call. And now it’s too late to profit. The smart money, of course, wants to find out what the earnings call is going to say before it happens.
But how?
Of course, you can’t ask Blackberry itself–that’s illegal. And you can’t gather sales data from all vendors around the world before the earnings call–that’s impossible. So you need to get at the information from an angle–find ways to predict the market’s response to the new phone models and use that as the basis for your investment decisions.
There are several ways to do this, but the most important first step is to know the market you are investing in. If you want to sell or buy BBRY, you should know technology, computers, and mobile phones. The same goes for any stock in any industry: before you buy, learn the industry that the company works in, and that company’s place within it. With that information, you’ll be much more confident in your investment decisions, and your chances of being on the right side of the trade skyrocket.