Blackberry : The Motley Fool Review

Is BlackBerry Ripe for a Comeback?

BlackBerry (TSX: BB)(NASDAQ: BBRY) missed revenue estimates in six of the last eight quarters, not to mention the heavy cash burn and write-downs it had to live through during those periods, but last quarter, BlackBerry managed to post a GAAP profit.

Could this be the bottom investors have been waiting for? Frankly, taking a position in Blackberry even now is a gamble — here’s why.

The competition isn’t standing still

Last quarter, Apple (NASDAQ: AAPL) sold 43 million iPhones even after the record breaking 51 million in Q1. Of those 43 million, 66% came from overseas (BlackBerry’s bread and butter), showing that Apple is set to gain share in the emerging marketplace. Meanwhile, Google has over 1 billion Android devices activated and more than half of the market in the U.S., along with an ever-increasing offering of products within the Android ecosystem. BlackBerry is going to need a blockbuster product to attract consumers to its products.

The menace of another write-down

BlackBerry gets 71% of its revenue outside North America and while it was announced that the Z3 was launched in Indonesia along with eight new markets to follow, a write-down of inventory due to low sales is probable. Considering BlackBerry’s recent history with new products coupled with competition from the emerging market phone manufacturers, it is a danger that needs to be taken into account.

A sliver of optimism

Along the cost reduction side of the income statement, BlackBerry seems to be doing well with its strategy. It managed to post a gross margin of 48%, an increment of 5% over last quarter along with reducing adjusted operating expenses by 57% on a year-over-year basis. So while growth is not quite there yet, at least the company is now more aligned on the cost side with its anticipated revenue stream. The sale of its real estate managed to increase cash on the balance sheet to $3.1 billion, allowing management more freedom to maneuver without the threat of liquidity in the near to mid future.

New markets and executive vote of trust

It was announced last week that BlackBerry signed an accord with Amazon (NASDAQ: AMZN) to open the BlackBerry devices to the Amazon app store, giving its users access to the most popular apps on the market at the moment. Moreover, new CEO John Chen bought 50,000 shares so far in 2014 sending a signal that the top executive is bullish on the company’s prospects.

Proceed at your own risk

Whether or not you believe in BlackBerry, opening a position is speculation at this stage. With such high volatility both pre- and post-earnings release in the past years, it might be more prudent to sit this one out until the restructuring is on more sound footing.

BlackBerry rallies as Passport images/specs leak

  • Leaked pictures of BlackBerry’s (BBRY +4.8%) anticipated Passport phone show a rectangular device with an abbreviated QWERTY keyboard.
  • The enterprise-focused device reportedly features a 4.5″, 1440×1440, display (1:1 aspect ratio), 32GB of storage, 3GB of RAM, and a hefty 3450mAh battery.
  • John Chen recently announced the Passport would launch in September. The leaks come two weeks after BlackBerry announced (in a strategy shift) Amazon’s Appstore for Android would be integrated with BlackBerry 10.3 (due this fall), and that it’ll work with BlackBerry developers to migrate their apps to the Appstore.

BLACKBERRY(BBRY:NASDAQ, US)

10.01USDIncrease0.23(2.35%)Volume: 
Below Average
As of 30 Jun 2014 at 10:58 AM EDT.

 

QUOTE DETAILS

Open 9.82 P/E Ratio (TTM)
Last Bid/Size 10.01 / 63 EPS (TTM) -11.39
Last Ask/Size 10.02 / 122 Next Earnings 26 Sep 2014
Previous Close 9.78 Beta 1.19
Volume 5,636,179 Last Dividend
Average Volume 31,033,955 Dividend Yield 0.00%
Day High 10.05 Ex-Dividend Date
Day Low 9.78 Shares Outstanding 526.9M
52 Week High 12.18 # of Floating Shares 500.0557M
52 Week Low 5.44 Short Interest as % of Float 19.19%

 

Goldman Sachs Conviction Buy List

If one brokerage firm on Wall Street can generate excitement with stocks to buy, it is Goldman Sachs. That is particularly so when the company makes changes to its Conviction Buy List. On Friday, two very unusual changes were made: a master limited partnership (MLP) and a coal company were added to the firm’s prized Conviction Buy List.

MarkWest Energy Partners L.P. (NYSE: MWE) was maintained as a Buy at Goldman Sachs, but the MLP was added to the Conviction Buy List and given a $78 price target. MarkWest closed at $70.64, has a 52-week range of $58.62 to $75.79 and has a consensus analyst target price of only $71.93. MarkWest is worth some $11.5 billion, and its distribution rate (“yield equivalent”) is listed as 5.1%.

SunCoke Energy Inc. (NYSE: SXC) is not a typical Conviction Buy List stock. The company operates as an independent producer of coke in the Americas, offering metallurgical and thermal coal for use as a raw material in the blast furnace steelmaking process. Goldman Sachs had a Buy rating but moved it up to the Conviction Buy List and assigned a $27 price target. After closing at $20.56, SunCoke has a 52-week range of $13.58 to $23.90, and the consensus price target is $25.33.

Metallurgical and thermal coal might not be as big a target in the current administration’s anti-coal push, but anything to do with coal has been a very hard sell to the investment community of late. As for risks in individual MLPs, MarkWest has diversified operations around the nation in several shale regions.

Shipping Sector : The Recovery That Never Arrived

ultramax_dry_bulk_top.jpgAs we approach midyear 2014, shipping’s economics remain stuck in the doldrums will little or no recovery in sight. The surplus capacity of ships to the cargoes requiring transportation has been aggravated by the delivery of a massive orderbook of new ships that followed the boom markets of the middle of the last decade.

This surplus is not limited to a few markets but, with the possible exception of gas, both LNG and LPG, it has affected the rest and in particular the wet and dry bulk, and the container markets. The effect has been severe as few ships in these markets generate a profit after operating expenses, debt interest and amortization.

Numerous public companies have gone bankrupt as also have many private ones. The German KG funds have been almost completely wiped out and created huge losses for the German shipping banks. The average age of the world fleet is at an historic low, meaning it will be around for at least another decade. Unfortunately when companies go bankrupt or when their ships get arrested and sold, they do not go away but continue to trade with lower capital costs, thereby prolonging the depressed freight markets.

Furthermore a majority of the fleets in most sectors trade in the spot markets without any period charter cover, in the false expectation that markets will recover or secondhand values will increase.

This however ignores the facts that shipyard capacity remains high and in countries like Korea and China has now become a strategic industry supported with domestic banks funding the construction period and government funds backing Export Credit. All without any secure operating income from charters.

Unfortunately this rush to order new ships has been fueled by an influx of new money, both equity and bonds from Private Equity and Hedge Funds that are gambling on ship values and not the long-term revenue streams from operations.

The vast majority of the ships on order today have no contractual employment and no evidential income other than indications of future ship values referenced back to the boom years of 10 years ago.

Some have likened this influx of new money to the “Blind Capital” of the mid-1800s. “Credulous capital, ignoring risks, flooding into unwise investments”.

There is no sign of any investment interest from Mutual Funds or Institutional Investors such as Pension Funds or Life Insurance companies which are usually averse to short term gambles. The speculative day traders have fun playing the rumors and the price volatility of the publicly traded companies.

Even more surprising is the activity of some of the Private Equity funds buying distressed bank debt at marginal discounts. If a shipowner cannot serve his existing bank debt, how is he going to service the new owners of the debt who have much higher expectations of return on their investments than simple bank margins?

It has been said that some of these funds are looking for default so they can convert the loans to equity, take over the ships and sell them for a profit. The track record of these deals so far is not good and the current focus on newbuildings only extends the excess fleet capacity and prolongs the lower freight rates which are the key economic of the shipping industry.

The list of publicly traded shipping companies on the New York stock exchanges is the worst performing of any sector. Original equity has been emasculated by secondary offerings and huge secured debts that in many cases today exceed the current market value of the ships that are the security. In the past 12 months we have seen the emergence of new forms of “Junk Bonds”, with double digit interest rates, which rapidly escalate on default and look more like the Cash Advance lending that proliferates among the poor. This junk is surprisingly not shown as debt in the borrower’s balance sheets and is ironically named as “Perpetual”.
So while new money is finding the shipping industry what is the outlook for the services it provides?

The freight markets for most ship types remain severely depressed because of the excess capacity that was generated from the new-building orders that followed the brief boom of 10 years ago, and then faced the financial crises and the global recession that still envelops the world today.

Yet it is reported that some $40bn of newbuilding orders were placed in the first 4 months of 2014.

This current reckless activity in ordering hundreds of new ships will only extend further the bad markets and push any balancing between supply and demand into the next decade, at the earliest. The claims of fuel economies of the new ships will not force earlier scrapping as the older ships will have less capital invested in them and can be maintained to operate until they are at least 20 years old.

There is no evidence of any increased demand for shipping, except in the gas sectors, and the newfound resources of oil and gas in the USA will have a negative effect on crude oil shipments. This may well be compounded by the new pipelines between Russia and China, the reduction in consumption of gasoline in China and the expansion of “Fracking” in Europe. The USA will reduce its imports of crude oil by at least 50% in the next 10 years and convert its trucking fleets to natural gas by 2025.

It unfortunately will take several years before the current influx of new money faces the reality that it is operating income that makes a business and not the fluctuating values of the operating assets.
Source: First International Corporation

Ship owners invest $18.4 billion during April for newbuildings and second hand vessels

shipbuilding_frontview_shipyard_top.jpgShip owners around the world have kept on piling up newbuilding orders as demand for modern tonnage has remained unabated during the month of April. According to data compiled by shipbroker Golden Destiny, a total of $16 billion was invested in newbuilding orders during April, with an additional $2.4 billion headed for second hand tonnage. Newbuilding orders were up by 7% on the month and up by 53% on the year. A total of 318 vessels were contracted, while 181 new orders were reported at an undisclosed price. In terms of second hand vessel pruchases, Golden Destiny reported a decline of 54% on a monthly basis and a fall of 30%, compared to the same month of last year. A total of 93 vessels were traded.

According to the shipbroker’s analysis, “April ended with unexpected downward pressure in the performance of dry freight market as oversupply of vessels seems to head downwards the freight market recovery. World economy in a recovery mode with fears of slowdown from the weaker performance of Chinese economy that also shadows the freight performance of dry bulkers. Chinese economic growth slowed down to 7.4% during the first quarter of the year, but its iron ore appetite stays solid and is expected to bring future firmness in Baltic Dry Index that now tries to stay afloat above the psychological barrier of 1,000 points. A downward pressure is also witnessed in the performance of crude freight rates, while the container market tries to benefit from the gradual recovery of developed Eurozone to resolve the key issue of “oversupply”. The significant upturn of dry and wet freight market, during the first quarter of the year, resulted also in a continued upward momentum of shipping investments that now has started to slow, but asset prices have not yet followed the downward incline of freight market. Investors seem that wait to see the performance of freight market and development of asset prices in the coming days in order to renew their investment strategy”, said Golden Destiny.

It added that “2014” signals to be one more challenging year with threats and investment opportunities as asset prices remain significantly at lower levels compared with their 10 years average prices. Vessels oversupply is very likely to be rebalanced with demand growth this year for the first time since the first downturn in 2009, but it is too early to confirm this trend as newbuilding appetite keeps high and refuels the existence of imbalance between vessels’ supply growth and demand”.

The shipbroker also noted that “overall, S&P activity in the secondhand market for April 2014 ended on lower levels than last month and even last year. Scrapping activity is also showing slower volume and newbuilding appetite persists on the high side. Despite the downward incline of secondhand purchasing appetite in April, shipping players keep much higher levels of activity from last year. During January-April 2014, the average number of weekly reported S&P transactions is 35 vessels, up by 40% year-on-year compared with 25 vessel purchases in the first four months of 2013 and up by 67% from 2012 levels (21 vessel purchases).
Compared with the investments in the secondhand market, in terms of number of vessels, the ordering appetite for the construction of new vessels is 97% higher than the number of vessels purchased by shipping players worldwide. During the first four months of 2014, the average number of weekly reported new orders was 69, up by 86% year-on-year (37 new orders on average reported per week in January-April 2013) and up by 165% from 2012 levels. (26
new orders on average reported per week in January-April 2012)”, said Golden Destiny.

DEMOLITION MARKET
“In the demolition market, the scrapping appetite of shipping players shows almost similar levels of last year with a soft downward incline from 2013 and 2012 levels. Record scrapping appetite in the container segment supports strong ship recycling business for the shipyard in India that offered very alluring levels of disposal rising to excess $500/ldt.
During January-April 2014, the average number of weekly reported demolitions represents 16% year-on-year decline with 16 vessels reported on average per week in 2014 compared with 19 vessels disposals per week in 2013 and 20 vessel disposals in 2012″, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

 

Pan American Silver Corp.

 

PAA : TSX : C$15.75
PAAS : NASDAQ
HOLD 
Target: C$18.75


COMPANY DESCRIPTION:
Pan American Silver’s key operating mines include
Huaron, Morococha and Quiruvilca in Peru, Dolores, La
Colorada and Alamo Dorado in Mexico and Manantial
Espejo in Argentina. The company maintains ownership
of the Navidad Project located in Chubut Province,
Argentina, to which we ascribe no value.
All amounts in C$ unless otherwise noted.

Metals and Mining — Precious Metals and Minerals
PEA HIGHLIGHTS STRONG
ECONOMICS FOR DOLORES
EXPANSION
Investment recommendation
We reiterate our HOLD rating on shares of Pan American Silver
following results for Dolores’ PEA contemplating the addition of a
milling and pulp agglomeration circuit to the process flow sheets and the
development of an underground mine. While the company reports a
strong IRR for the project, a construction decision has been deferred for
9-12 months to proceed with additional studies and continue the
delineation of underground mineralization.
Investment highlights
 Robust economics, with initial capex estimate of $105 million,
returning an IRR of 33% at $1,300/oz gold and $22/oz silver. We
estimate the development of this project to begin mid-2015, with the
pulp agglomeration plant operational mid-17 and the underground
mine at full operation (1,500 tpd) in H1/18E. We estimate that the
development of the pulp agglomeration circuit and underground
mine is approximately 5% accretive to our company NAV.
 Annual silver production is expected to increase by 38% in the first
10 years, due largely to a 21% increase in throughput and better
recoveries (~7% for both gold and silver). While an underground
resource has not been provided, we estimate 5.25 Mtonnes (based
on 1,500 tpd for 9.5 years of operations) containing approximately
11 Moz silver and 0.3 Moz gold.
Valuation
We have revised our target to C$18.75 from C$17.75 based on 1.05x our
5%/operational NAVPS estimate of C$13.85 (previously C$13.09) plus
net debt and other corporate adjustments. Our 2014 EPS estimate has
been revised to $0.28 from $0.15 following the incorporation of Q1/14
results and revised 2014 cash cost estimates.

Pandora Media BUY

 

P : NYSE : US$28.20

BUY 
Target: US$43.00

COMPANY DESCRIPTION:
Pandora radio is the market leader in personalized
Internet-based radio listening in the US. The company
uses its proprietary algorithms as part of the Music
Genome Project to generate playlists for users that are
personalized and cater to the tastes of individual users.

All amounts in US$ unless otherwise noted

Technology — Internet
POSITIVE MANAGEMENT MEETINGS;
FOCUS ON LOCAL SALES CAPACITY
Summary
We hosted a series of investor meetings in Europe with Pandora’s
investor relations team, Dominic Paschel and Palmira Farrow. We exit
the trip with a little jet-lag accompanied by renewed confidence in
Pandora’s ability to exceed our revenue targets over time, especially
when viewed through the lens of future local sales capacity. Pandora
stock is still down sharply from last year’s highs. Meanwhile, we believe
business momentum is strong. Given the stability of Pandora’s model,
we do not expect dramatic revenue upside (or downside) in any given
period. However, we continue to believe Pandora is early in attacking a
large opportunity. We note the European investor base has historically
had limited exposure to Pandora’s U.S.-centric music service (and
therefore the stock), but that interest appears to be growing especially in
the context of a potential listing for Spotify.
Key points
 We check our primary revenue forecast (driven by hours & RPM)
with a “sales capacity” forecast that projects Pandora will grow its
local sales force from 100 in Q1 to ~222 by the end of 2016. We
believe local audio ad revenue should grow by ~167% in 2014 and
68% in 2015. We believe the local sales force is ramping
productivity more quickly.
 We expect a steady but measured path towards profitability, with
management adhering to a philosophy of margin expansion each
year.
Valuation
We maintain our BUY recommendation and $43 price target. Our price
target is based on 45x our FY18 non-GAAP EPS estimate of $1.56,
discounted to present at 10.5%

Apple’s Big IPhones Said to Start Production Next Month

June 24 (Bloomberg) — Apple suppliers in China will begin mass production of its largest iPhones ever next month, according to people familiar with the plans, as the smartphone maker faces increased competition. Rosenblatt Securities Senior Analyst Brian Blair and Bloomberg Businessweek’s Peter Burrows speak on “Bloomberg West.” Blair owns no stock in Apple. (Source: Bloomberg)

Apple Inc. (AAPL) suppliers in China will begin mass production of its largest iPhones ever next month, according to people familiar with the plans, as the smartphone maker faces increased competition.

Apple is ramping up on two bigger devices, said the people, who asked not to be identified because the plans are private. One model will have a 4.7-inch display, compared to the 4-inch screen of the current iPhone 5s, that may be available to ship to retailers around September, said two of the people. A 5.5-inch version is also being prepared for manufacturing and may be available at the same time, the people said.

Apple is getting ready for its annual unveiling of new iPhones after rivals including Samsung Electronics Co. and HTC Corp. released smartphones with displays that are as large as 5.7 inches. Consumers have been gravitating toward larger-screen devices — in China, 40 percent of mobile gadgets based on Google Inc.’s Android operating system that were sold in 2014 had display sizes of more than 5 inches, according to an estimate from Forrester Research.

Related:

Chief Executive Officer Tim Cook is under pressure to reignite Apple’s sales growth and the iPhone, which generates more than half of the company’s annual revenue, remains his chief weapon. Last year, the smartphone produced $91 billion in revenue alone, more than the total sales of Oracle Corp., Yahoo! Inc., Facebook Inc. and Twitter Inc. combined.

Photographer: Angel Navarrete/Bloomberg

An employee wears a blue Apple-branded t-shirt and name badge during a media briefing.

Natalie Kerris, a spokeswoman for Cupertino, California-based Apple, declined to comment.

 

Rounder, Thinner

Apple shares fell less than 1 percent to close at $90.28 in New York, leaving them up 13 percent this year.

The new iPhones will also be rounder and thinner than previous models, said one of the people. Production of the 5.5-inch model is more complicated than the smaller version, resulting in lower production efficiency that must be overcome before manufacturing volume can be increased, said the person.

Apple is developing new iPhone designs including bigger screens with curved glass and enhanced sensors that can detect different levels of pressure, Bloomberg News reported in November. Called 2.5-dimension glass, the material lets manufacturers taper the edges of the screen where the bezel meets the frame of a smartphone.

Earlier this month, Apple also introduced new features for the software powering the iPhone and iPad in a bid to add more functions and utility to the devices. The company’s new iOS 8 mobile software has capabilities that enable people to use the gadgets to monitor their health and remotely control locks and lights for their home.

U.S. Ruling Loosens Four-Decade Ban On Oil Exports- Tanker Stocks May Benefit

Shipments of Unrefined American Oil Could Begin As Early As AugustJune 24, 2014 5:14 p.m. ET Wall Street Journal
The Obama administration has quietly cleared the way for the first exports of unrefined American oil in four decades, allowing energy companies to chip away at the long-standing ban on selling U.S. crude overseas.

Federal officials have told two energy companies that they can legally export a kind of ultra-light oil that has become plentiful as drillers tap shale formations across the U.S. With relatively minimal processing, oil shipments could begin as early as August, according to one industry executive involved in the matter.

Using a process known as a private ruling, the U.S. Commerce Dept.’s Bureau of Industry and Security is allowing Pioneer Natural Resources Co. of Irving, Texas, and Enterprise Products Partners LP of Houston to export ultra-light oil known as condensate to foreign buyers who could turn it into gasoline, jet fuel and diesel.

Both companies confirmed they had received the rulings.

Under current rules, companies can export refined fuel, such as gasoline and diesel, but not oil itself. The Administration’s new approach, which hasn’t been publicly announced, redefines some ultra-light oil as fuel after it has been minimally processed, making it eligible for sale abroad.

The Commerce Department said the companies have improved the processing of the crude in a way that qualifies it for export, even though the oil wouldn’t count as being traditionally refined. Exactly how the agency defines condensate and remains unclear.

The first shipments are likely to be small, but could ultimately encompass a lot of the 3 million barrels a day of oil that energy companies are pumping from shale, industry experts say, depending on how regulators define what qualifies for export

Tankers to benefit from more energy exports, Jefferies says • 11:59 AM

  • While refiner stocks are tumbling on fear that margins will be hurt as the U.S. begins to allow U.S. condensate exports, the sensational headline speculating on the end of the oil export ban “is a long way from giving two companies export permissions to full U.S. crude exports.”
  • However, Jefferies analysts say the news is a near-term positive for tanker companies that ship oil, such as Frontline (FRO -4.6%) and Nordic American Tanker (NAT +1.3%).
  • Even while condensate export volumes are likely to be limited, any increase in export volumes should have a net positive impact on the crude oil tanker market, the firm says, with any heavy condensate volumes exported out of the U.S. to be carried out on either Aframax crude oil tankers and/or Panamax crude oil tankers.

TEEKAY TANKERS LTD(TNK:NYSE, US)

4.20USDDecrease0.03(-0.71%)Volume: 
Average
As of 25 Jun 2014 at 10:59 AM EDT.

QUOTE DETAILS

Open 4.18 P/E Ratio (TTM) 17.6x
Last Bid/Size 4.19 / 24 EPS (TTM) 0.24
Last Ask/Size 4.20 / 1 Next Earnings 4 Aug 2014
Previous Close 4.23 Beta 2.10
Volume 184,389 Quarterly Dividend 0.0300
Average Volume 782,689 Dividend Yield 2.86%
Day High 4.29 Ex-Dividend Date 15 Apr 2014
Day Low 4.18 Shares Outstanding 83.7M
52 Week High 5.08 # of Floating Shares 62.75428M
52 Week Low 2.49 Short Interest as % of Float 13.74%
chart

KNIGHTSBRIDGE TANKERS LTD(VLCCF:NASDAQ, US)

BuySell
14.69USDIncrease0.12(0.82%)Volume: 
Average
As of 25 Jun 2014 at 11:00 AM EDT.

 

QUOTE DETAILS

Open 14.53 P/E Ratio (TTM) 29.8x
Last Bid/Size 14.68 / 4 EPS (TTM) 0.49
Last Ask/Size 14.69 / 8 Next Earnings 13 Aug 2014
Previous Close 14.57 Beta 0.95
Volume 120,159 Quarterly Dividend 0.2000
Average Volume 431,246 Dividend Yield 5.45%
Day High 14.87 Ex-Dividend Date 20 May 2014
Day Low 14.50 Shares Outstanding 30.5M
52 Week High 16.32 # of Floating Shares 11.83527M
52 Week Low 6.50 Short Interest as % of Float 14.67%