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Citron Research: BlackBerry Worth $20 Based on Potential Success in 'Internet of Things'


A bullish report is pushing shares of the embattled smartphone maker higher.

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This morning, Citron Research issued a report on BlackBerry (NASDAQ:BBRY) that is having a very positive impact on the stock.

Citron raised its target price on BlackBerry to $20, calling it 'Our Best Idea in YEARS' based upon the company's potential to succeed in the Internet of Things, which I discussed yesterday in less detail.

Here are the main points of Citron's case:

1. By 2020, there will be 50-75 billion 'connected things', according to SAP (NYSE:SAP).

2. BlackBerry has an unparalleled reputation for delivering large quantities of data on an end-to-end secure platofrm, and the success of its QNX platform within cars is a good example of real-world viability.

3. Being Canadian means the company may be beyond the NSA's influence, which could mean easier relations with foreign customers and governments.

4. BlackBerry has a $3.2 billion enterprise value, while Google (NASDAQ:GOOG) paid $3.2 billion for Nest, and Apple (NASDAQ:AAPL) paid $3 billion for Beats.

5. The 19% short interest and $5 per share in hard assets on the balance sheet could help reduce downside risk.

6. There are a host of potential acquirers, including Microsoft (NASDAQ:MSFT), GE (NYSE:GE), Intel (NASDAQ:INTC), and IBM (NYSE:IBM).

My Take

I'm not long yet, but BlackBerry is turning into a very interesting stock.

It's not because of Project Ion's (the name for its Internet of Things program) actual capabilities.

The real bull case for BlackBerry is that tech investors could pile into the stock as an Internet of Things play, creating a short squeeze.

BlackBerry doesn't have to succeed for the stock to go up -- investors simply have to think that it can. The low valuation (~0.7X sales) implies zero expected growth. The emergence of the Internet of Things as an investment theme could change those expectations very quickly, regardless of what the future actually holds.

Twitter: @MichaelComeau

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