The company is operating in an industry with enormous potential but is selling a product which the world wants to forget. Still, BlackBerry Ltd (NASDAQ:BBRY) is pricing its phones at par with Samsung Electronics Co., Ltd. (KRX:005930)’s Galaxy S series, Apple Inc. (NASDAQ:AAPL)’s iPhones or Nokia Corporation (ADR) (NYSE:NOK)’s Lumias. With the management’s insistence to sell its below-average product at premium prices, the outlook for this smartphone maker is negative.
While the turnaround of this company is highly unlikely, I believe that BlackBerry Ltd (NASDAQ:BBRY) is more valuable than what its current price indicates. The company has zero debt and hence a zero debt-to-equity ratio, about $2.8 billion of cash reserves and $3.7 billion more current assets than liabilities. But its market cap is just $4.7 billion. Analysts (such as here) have identified that the company is worth ~$7 billion.
If this undervalued phone-maker can figure out a way to “preserve” value, then it will eventually “create value” for its shareholders. This alone could result in a significant upside and we’re not even talking about any buyout offer from a tech giant (such as Lenovo Group Limited (ADR) (OTCMKTS:LNVGY)) interested in purchasing the phone-maker. While I don’t think that BlackBerry Ltd (NASDAQ:BBRY) will ever rise to its former glory, it could continue to operate as a low-volume phone-maker with high-margin software and service operations.
Bigger than just a daily deals website
The daily deals giant Groupon Inc (NASDAQ:GRPN) has struggled under its former CEO with a disastrous IPO and restatements of earnings. The company is still not profitable yet, but since the departure of Andrew Mason, its shares have soared and are up 95% this year. Analyst at Deutsche Bank AG DB Gold Double Long ETN (NYSEARCA:DGP) have identified that Groupon Inc (NASDAQ:GRPN) appears to be moving toward a “pull” strategy where customers visit Groupon Inc (NASDAQ:GRPN) through its website, apps or search engines and are then offered a rich inventory of personalized deals. This is opposed to a “push” strategy that relied on generating sales through mass emails.
It also reported impressive mobile numbers in its previous quarterly results when its mobile transactions in North America improved sequentially from below 40% in Q4 2012 to 45% in Q1 2013.
Long-term vs. short term
Moreover, for Groupon Inc (NASDAQ:GRPN), its not just about daily deals anymore. The company is eyeing expansion in the e-commerce space and is actually becoming one of the most heavily mobile-penetrated e-commerce players. Furthermore, Groupon Inc (NASDAQ:GRPN) has zero debt levels and hence a zero debt-to-equity ratio. I believe that the long- term outlook of the firm is positive, particularly due to its move toward selling overstock items, which is shown in the strong performance of Groupon Goods.
But I don’t think Groupon Inc (NASDAQ:GRPN) is an attractive investment at the current price levels. Unlike BlackBerry Ltd (NASDAQ:BBRY) mentioned above, Groupon is trading 8.0 times its book value when the industry’s average is just 5.4 times. Therefore, I would rate it as a ‘hold’.’
Sarfaraz Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Sarfaraz is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Should You Invest in These Turnaround Stocks? originally appeared on Fool.com is written by Sarfaraz Khan.
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