BlackBerry Ltd. (BB) shares took a sharp turn lower Thursday, dropping more than 11% as investors decided to cash in some chips after a massive rally. The stock had been on a tear since the company reported fiscal first-quarter results that blew past Wall Street's expectations.
On June 25, BlackBerry shares surged nearly 20% to close at $10.32 after the company reported revenue of $152.9 million — a 26% year-over-year increase and well above the $138.19 million analysts were looking for. Adjusted earnings per share came in at 4 cents, beating the 3-cent estimate, and adjusted EBITDA hit $36.3 million. The stock kept climbing in the days that followed as analysts raised their price targets.
RBC Capital Markets analyst Paul Treiber, for instance, lifted his price forecast from $4.50 to $9 while keeping a Sector Perform rating. He noted that BlackBerry was trading at 9.6 times next-twelve-month EV/sales, near the top of its five-year range and at a 112% premium to its auto-tech peers. That kind of valuation can make investors nervous, and Thursday's pullback suggests some are taking profits while the getting's good.
What's Driving the Business
The star of the quarter was BlackBerry's QNX division, which saw revenue jump 26% year-over-year to $72.3 million. Management said development license revenue hit its highest level in eight quarters — a sign that automakers and other industrial customers are betting big on the software. The Secure Communications business also held up well, fueled by government demand for cybersecurity upgrades and digital sovereignty.
So the fundamental story is still intact. The question is whether the stock got ahead of itself.
Where the Charts Say BB Goes From Here
Even with Thursday's drop, BlackBerry shares are still in a strong longer-term uptrend. The stock is trading about 14% above its 20-day simple moving average of $9.90 and a whopping 125% above its 200-day SMA of $5.01. That tells you the bigger move over recent months has been decisively higher. The golden cross that formed in May — when the 50-day SMA crossed above the 200-day SMA — also supports the bullish case.
Here are the two levels to watch:
- Key Resistance: $13.59 — the 52-week high that marks the prior breakout ceiling. If the stock can reclaim that level, it could signal a new leg higher.
- Key Support: $9.90 — the 20-day SMA area that often acts as the first line of defense during pullbacks. A break below that could test the 50-day SMA around $8.50.
At the time of publication Thursday, BlackBerry shares were down 11.47% at $11.34. It's a reminder that even good news can lead to a hangover when the party gets too wild.
