Research In Motion Ltd (BBRY)’s Stock Is Still Underrated on Wall Street

In all likelihood, most iPhone users will stay within the iOS ecosystem, and most Android users will stay within Android going forward. But consumer desires for something “fresh” could drive a significant number of people to Research In Motion over the next couple of years. This may get BlackBerry to only 10% market share, but the smartphone market has grown tremendously since the original BlackBerry went out of fashion. Today, having 10% market share would involve having Research In Motion sell more phones than it did at the peak of its popularity.

Loyal user base
Lastly, Research In Motion has an extremely loyal high-end user base of 20 million to 30 million (as well as a larger group of less-profitable subscribers with low-end phones). These users will almost all upgrade this year, and most of them will continue to prefer QWERTY phones. (To put it another way, why would anybody in the U.S. still be using a BlackBerry today, unless they’ve been waiting to upgrade to the Q10?) This fact seems underappreciated among Wall Street analysts, and strong sales of the Q10 in the next few quarters will probably surprise most analysts and investors, driving the stock higher.

Risky, but not too risky
Like most technology stocks, Research In Motion is a fairly risky investment. Changing consumer tastes, high competition, software glitches, and the like all have the potential to negate BlackBerry’s potential. That said, BlackBerry trades for less than book value, and the company is likely to be profitable this year because of high upgrade demand from existing users. These factors mitigate much of the risk in owning Research In Motion today.

Of course, it is possible that iPhone and Android users are already so locked in to their ecosystems that they won’t consider switching even if they do get frustrated with their phones. It’s also possible that Microsoft Corporation (NASDAQ:MSFT) and its partners will soon figure out how to build and market a Windows phone successfully, and thereby grab the third spot in the smartphone world. Nevertheless, BlackBerry has a small but loyal user base to build on, an innovative new OS, and a massive addressable market. This should be more than enough to make current shareholders very happy.

The article BlackBerry Is Still Underrated on Wall Street originally appeared on Fool.com is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg owns shares of Apple and BlackBerry and also has long January 2014 $13 calls on BlackBerry. The Motley Fool recommends Apple and Google and owns shares of Apple, Google, and Microsoft.

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