BlackBerry Ltd (BBRY) Leadership Change Fails to Inspire Wall Street

BlackBerry Ltd (NASDAQ:BBRY) replaced the head of its device business, but Wall Street remains unimpressed

by Josh Selway

Published on May 9, 2016 at 1:59 PM
Updated on Jun 24, 2020 at 10:16 AM

It's been an ugly 2016 for mobile phone maker BlackBerry Ltd (NASDAQ:BBRY). The stock took a post-earnings tumble last month, and is down another 1.8% today at $6.57, amid news the company is replacing Ron Louks, the head of its device business, with Ralph Pini. BlackBerry also announced changes to its Enterprise Partner Program. Still, the drop puts BBRY 29% below breakeven year-to-date, and on pace for its lowest close since early October. 

Despite this pitiful technical track record, options traders have actually been targeting call options during the past two weeks across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). BBRY sports a 10-day call/put volume ratio of 5.32 across these exchanges, which is higher than two-thirds of similar marks from the past year. 

On the other hand, BBRY's Schaeffer's put/call open interest ratio (SOIR) of 0.82 ranks in the high 89th annual percentile, meaning short-term options traders are less call-skewed than normal. Moreover, the most popular BBRY strike during the past two weeks, judging by open interest added, is the May 6.50 put. Data from the ISE confirms buy-to-open activity has taken place, meaning these traders are betting on BBRY falling below $6.50 before front-month options expire at the close next Friday, May 20. For reference, the stock's intraday low sits at $6.53. 

BlackBerry is also heavily shorted, with 14% of its float sold short -- or 10 days' worth of buying power, at average daily volumes. Considering this, it's possible -- or even likely -- that the recent call buying on BBRY is a result of short sellers buying protection against an unexpected upside move. 

Analysts are also betting against the stock. In fact, just two of the 16 analysts covering BBRY recommend buying it. 

While this all paints a dire picture for BlackBerry Ltd (NASDAQ:BBRY), shareholders can look on the bright side. First, the stock's 14-day Relative Strength Index (RSI) of 29.41 sits in oversold territory, meaning a short-term bounce could be coming. Second, the $6.30-$6.50 area contained BBRY's two other major pullbacks over the last year. 

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