The Tech Sector's Wild Ride
Moustafa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The roller coaster ride that has been the tech sector in 2013 continues to get more and more intense. After finally releasing their much-anticipated BB10 platform, BlackBerry (NASDAQ: BBRY) has been hammered, not for the quality of their offering but by consistent oscillation from different analysts claiming upgrades, downgrades, and Buy/Sell recommendations. Reports surfaced the other week that Jim Balsille had sold off his remaining shares in the company and had severed ties. This in itself caused a sell off, yet the report was indicating an event that happened before the New Year.
Apple (NASDAQ: AAPL), who could do no wrong a few months ago, is being punished for weaker sales even though they had beaten analysts recommendations in most categories in their last earnings report. Facebook (NASDAQ: FB) has seen their shares tumble because of fear they will not be able to monetize their ecosystem, even after growing mobile revenues, which are key to their future success. The only tech company moving forward seems to be Google (NASDAQ: GOOG), who saw their shares pass the $800 mark for the first time ever, buoyed, funny enough, by their own respective increase in mobile ad revenues.
An Enigma Wrapped in a Mystery
I have been bullish on BlackBerry for quite some time now, especially when the stock was languishing in the $6-$8 range and it was still known as RIM. If there was a turn around and avoid bankruptcy checklist, BlackBerry has navigated down the list from top to bottom. They have changed their CEO, adjusted their company direction, reduced costs, and released a new platform that is comparable (and some say better in certain regards) to what is out in the market. All the reviews of the new Z10 phone have been very positive--throw in some enterprise malfunctions on Apple’s side, and BlackBerry seems in a great position. They had to push back their U.S. launch date a few weeks and were punished as the stock dove. Yet everywhere that the phone is being released it’s being very well received, from Canada to the U.K.
However, now there are dueling analysts out there releasing reports with very little factual evidence deciding what they think are the number of Z10 phones that will be sold. Some are upgrading Blackberry--others are Downgrading the stock. This has caused the price to tumble from $17-$18 back to $13, but with very little factual indication that there is a weakness in the underlying business. This does not even take into account the next phone, which will be the bread and butter for Blackberry and where it can differentiate from Apple and the Android handsets. The Q10, with a physical keyboard and all the new bells and whistles the Z10 has, is going to be something that can recapture enterprise customers, fans of the BlackBerry, and even those who have never enjoyed a full touch screen interface. It seems in the short term that the market is enjoying the weekly 10% surges that Blackberry has been experiencing with no real hard evidence behind them.
Up’s and Down’s
Apple has started to feel the roller coaster ride as well. Over the last six years they have been mostly untouchable, enjoying a continued and comfortable rise. As the iPhone and iPad progress through the natural product life cycle, investors are concerned that the innovative pipeline Apple has become famous for is drying up. Yet I am sure that Apple is one product announcement away from being right back on track. The issue now is that they are also in the realm of being punished for announcing or releasing a product that is not positively received by investors.
Mobile or not to Mobile
Google has been rewarded with their growth into mobile search, with their share price reaching new plateaus. What once was a concern for Google has now become another revenue stream. Google has diversified into everything from self-driving cars to mobile phones, but they still generate all their actual revenue from search. They are the market leader without a doubt, but it seems strange that we assume that they hold a position that will never be challenged. Facebook has not only made real strides in mobile search, but has also released an updated graph search, which is the real key to mobile ad revenues. Google has proven this by providing users with the best search algorithm, and therefore advertisers with the best opportunity to reach customers. Facebook faces some challenges, but with a billion-plus users and solid inroads into mobile ad revenues the potential is very much there.
When it is all said and done there will continue to be volatility in the short term in all these tech stocks, but overall I think each provides a strong investment opportunity. BlackBerry in the short term is strongly undervalued based on their product pipeline. Apple will suffer until they announce a new product or a substantial upgrade to a product in their mix, but at its present price is also attractive. Google is the safest play in the near term but also does not provide as much upside as the other stocks, whom have been much more beaten down. Finally, Facebook has fantastic upside over the near term but until some of their results materialize will continue to be volatile. If one can ride the roller coaster successfully there are some very interesting buy opportunities now.
mooseelz owns shares of Apple and Google. The Motley Fool recommends Apple, Facebook, and Google. The Motley Fool owns shares of Apple, Facebook, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!