Blackberry Poised to Ride the Smartphone Market Higher
Adetokunbo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Smartphones are the new norm. Once, any allusion to smartphones would bring from many a reaction in the form of a commendation to Blackberry (NASDAQ: BBRY). When the company lost its market share others took over, largely based on a combination of the cost-effectiveness and high functionality of their products.
Companies such as Apple (NASDAQ: AAPL), Samsung, and Google (NASDAQ: GOOG) have launched their own products and are furiously trying to establish a new standard for smartphones. While I see this as good for the market, I believe that Blackberry will continue to be a significant player because of the quality of its Blackberry 10 and the company's culture of innovation and creativity.
The sales success of smartphones is threatening to sink the feature phone market, with it being expected that the sales of the feature phones will fall in 2013. A report from a market researcher at Gartner shows that smartphones are becoming more affordable. Of the 1.875 billion mobile phones to be sold in 2013, 1 billion units will be smartphones; this is compared to 675 million units that were sold in 2012. Over the next few years, smartphone sales will increase due to the products’ apps, processing power, and improved wireless capabilities, which could in turn allow for a better accessory integration and solutions that will establish performance benchmarks against the category and overall market. Blackberry did a lot of work popularizing the smartphone concept and showing how a smartphone can provide rich customer experience. It also set the trend in keyboard security and dimension.
Competitor number 1: Apple. Apple’s iPhone 5 is a gateway into Apple’s iPad, iTunes, iPod, and iMac ecosystem. However, Nokia (NYSE: NOK) has shown through the recent introduction of the Lumia 925 that it is also capable of developing a phone that is a benchmark of high performance.
For Nokia, the company's recent movements have been eye-raising as investors saw its stock pop up after the release of Lumia 925 and a new Asha product – and this was despite a drop in profits and revenues. Nokia posted results of -$0.86 earnings-per-share, and the stock now trades over 150% above its 52-week low.
As for Apple, it gained a market share of 19.17% of smartphone sales last year, second only to Samsung. Owing to unfavorable trends, namely the competition posed by rivals, Apple’s stock has been facing a downward pressure. Peaking at $705.07 less than a year ago, the stock has declined almost 65% since then. It now sits around $449.31 per share but has a market cap bigger than that of Samsung.
The second notable adversary is Google’s Android. To speak the truth, Android has a head start in the smartphone mobile operating system race due to a wide selection of devices from a diverse range of partners. Samsung, for instance, is a leading Android smartphone seller.
Google’s Android therefore has contributed in no small part to its impressive stock performance. Some analysts are eying the $1,000 per share mark for the year. Additionally, research analysts at Cantor Fitzgerald raised their price objective on shares of Google from $900.00 to $1,030.00 in a recent report. The price target indicates a potential upside of 18.71%. Analysts at Topeka Capital Markets reiterated a “buy” rating on shares of Google in a recent research note to investors. The company still has some way to go before it reaches its 52-week high of $920.60 per share, however, so this might be a chance to get in.
Samsung’s smartphone sales continue to accelerate. Sales totaled 64.5 million units, up 85.3% from the fourth quarter 2013. Samsung’s Galaxy line is very sleek in appearance and possesses a crisp design, sharp screen, and a very fast processor.
Samsung’s brand has overshadowed the Android brand in the mind of the consumer. The company’s resources and ability to create a wide market reach is a strength that no competitor can emulate for now. From a valuation standpoint, Samsung trades on the cheap side, with a price-to-sales ratio of 1.13. This is on top of its trailing price-to-earnings ratio of 8.57 and an earnings-per-share of 151.67. So I think Samsung could well be worth a look.
Blackberry's main advantage is its reliability and innovation. With Blackberry 10, the company is giving its customers a value-driven product. If one adds the new Flurry Analytics to that equation, Blackberry is the epitome of convenience and a prospect for future revenue growth.
Blackberry’s stock has not been all of roses. Shares hit a 52-week low on September 24 last year, but they came roaring back to record a 52-week high of $18.32 in January. The stock is now trading around $14. I believe it will begin an upward trajectory as Blackberry 10 sales steadily rise. I also see stock positively reacting to growth in sales for Apple, Google, Nokia, and Samsung.
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Adetokunbo Abiola has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple 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!