BlackBerry Hits Iceberg in June

NEW YORK (TheStreet) -- As BlackBerry (BBRY) trades at $11.59 in premarket trading, after reporting a loss that I will discuss in a moment, I can't help but think about two things.

First, TheStreet's Jim Cramer nailed it, and warned investors not to buy it until under $12. Timothy Collins also shared Cramer's sentiments in his piece titled "Leave BlackBerry on the Vine" in Real Money. FYI, subscriptions are pretty cheap compared to stock losses, especially when you can try it for free.

Secondly, where was the earnings warning? Surely the Ontario company had a strong idea a couple of weeks ago in the context of analysts upgrading handset volumes and revenue. Why didn't BlackBerry give a warning? I know the company doesn't provide guidance, but that's not quite the same as issuing a warning for a previous quarter.

I think highly of BlackBerry's CEO Thorsten Heins for putting his career on the line and having the stomach for taking the helm, but today's sucker punch to investors didn't fit in with my perception of his leadership skills.

On Monday, I wrote Forget BlackBerry's Earnings, the Next Phone's What Matters and identified what shareholders need to focus on, the next "wow factor" phone. Even with great earnings today, which didn't happen obviously, if BlackBerry can't build the momentum to leapfrog Apple ( AAPL) and Android ( GOOG) phones, only diehard BlackBerry fans will buy them.

One or two more quarters like this last one and there won't be enough diehard fans in North America to fill Whiskey's Grill and Bar on a Friday night. It won't be easy knowing how busy the bar will be after the company announced it won't disclose subscriber numbers anymore.

Announcements that include "no future guidance" and "no subscriber numbers" are a clear shot across your portfolio bow that transparency is a thing of the past and you're moving away from investing and traveling toward gambling by holding a position.

If you're thinking of hanging on for the ride, or buying a ticket, keep in mind that the price of four BlackBerry shares could have bought you a third-class ticket on the Titanic; with enough left over for a few drink tickets (or maybe a life jacket?). It's hard to say which one will sink you first because at least some Titanic passengers survived.

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BlackBerry is worth about $10-$12 at junk-yard scrap metal prices, something I have written about in several articles, and Cramer mentions in the above video. However, when a stock is in play and crashing, it usually overshoots the mark before finding support. This is sometimes referred to as a dead-cat bounce. Don't be shocked if BlackBerry trades in single digits next week. You may want to wait until Tuesday or Wednesday before dipping your big toe into waters that are probably colder than the North Sea.

Also, don't dig your heels in thinking the balance sheet per share valuation will be your eventual lifeboat. Everyone else knows about the valuation, and the smart money knows how to discount the patients and other intellectual property.

In light of recent patent cases, not only is BlackBerry worth less on paper, but will continue to decline faster than reported if losses accelerate. That's why BlackBerry's "going dark" with guidance and subscriber numbers, increases investor peril.

Bottom line: if you believe BlackBerry has the ability to make phones that have the wow factor AND are so magnificent that people will give up their Androids and iPhones to change over, the stock is a clear buy; otherwise it's only a matter of time before we see SOS flares firing.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Robert Weinstein currently blogs, mentors traders, and writes several weekly columns in Rocco Pendola's Option Investing newsletter from his home in northern Wisconsin. Robert tends to focus on the psychological importance of goals, risk mitigation, emotion, and relatively short term market exposure. With nearly 30 years of studying and investing experience, Robert has experienced the many ups and downs in the financial markets and uses the knowledge gained to maintain balance. Robert believes the best way to make money investing is to avoid losing it. The best way to avoid losing is to know what emotional traps lay in the path of investors and learning how to avoid them. Robert is a voracious reader of financial related books often completing more than one book a week while not trading or writing. Robert contributes to his blog at paid2trade.com on a regular basis with an emphasis on studying behavior finance.


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