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BlackBerry back from dead (for now) with Z10

March 14, 2013: 1:18 PM ET
Where's the QWERTY keyboard? BlackBerry finally has a smartphone ... that looks like just about every other smartphone. But investors are thrilled.

Where's the QWERTY keyboard? BlackBerry finally has a smartphone ... that looks like just about every other smartphone. But investors are thrilled.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

We're number 3! We're number 3! And we might slip to number 4? For BlackBerry (BBRY) investors, it doesn't seem to matter.

BlackBerry, the technology company formerly known as Research in Motion, has a lot going for it right now -- despite a relatively low market share in the smartphone world. BlackBerry is trailing the Google (GOOG) Android camp of phone makers, most notably Samsung, as well as Apple (AAPL) in the mobile operating system race by a wide margin.

On top of that, some analysts think BlackBerry will slip behind Microsoft (MSFT) to 4th place this year, now that Nokia's (NOK) Lumias fly the Windows Phone flag.

But shares of BlackBerry are up more than 30% this year, easily outpacing the gains of Microsoft and red hot Google -- not to mention the rest of the sizzling tech sector.

Samsung's shares on the Korea Stock Exchange have soared over the past 12 months but have barely budged in 2013 despite the gigundous hype and marketing blitz for its new Galaxy S IV. Nokia's stock is down so far in 2013. And unless you've been living under an iRock, you know that Apple has been one of the worst performers in the S&P 500 since the stock hit an all-time high last September.

Can BlackBerry keep rallying? It's the 64,000 Loonie question. Hey, they're a Canadian company after all.

Related: Investors love their BlackBerry (stock)

On the one hand, BlackBerry finally seems cool again. Reviews for its new Z10 phone have been pretty decent, if not spectacular.

And BlackBerry announced late Wednesday that a mystery "established partner" ordered 1 million BlackBerry phones, the largest shipment ever for BlackBerry. It was the tech equivalent of sending white smoke from the chimney of the Vatican. Amazingly enough, investors actually noticed the press release even though it came just as Pope Francis was being introduced in Rome. BlackBerry shares surged 8% on the news, but pulled back a bit Thursday.

So who's buying that many BlackBerries? It's possible that AT&T (T) or Verizon (VZ) could be the "partner." Consumers can now pre-order the Z10 from the two largest wireless carriers in the U.S. and the phones officially go on sale later this month. Spokespeople for BlackBerry, AT&T and Verizon had no comment.

Then again, the order could be coming from one of BlackBerry's many corporate or government customers.

Related: Samsung targets BlackBerry with Knox

But regardless of who the identity of the buyer is, somebody bought a lot of BlackBerries. And that's obviously a good sign for a company that needs to get financially back on track.

And that hasn't happened yet ... which is the main reason why I think investors need to be skeptical of the BlackBerry rally. The company may no longer earn the derisive nicknames of BleakBerry and BlackBeary that I've used in the past. But it's not a picture of financial health either.

While sales are expected to rise nearly 15% in the current fiscal year ending in February 2014 -- according to the consensus of analyst estimates from Thomson Reuters -- they would still be down 30% from two years ago. The good news is that analysts have been raising their forecasts steadily since last August.

The same thing has happened with earnings or, shall I say, losses. The current consensus estimate on Wall Street is that BlackBerry will lose $199 million, or 32 cents a share, this year.

That's only worth applauding when you consider that analysts were predicting red ink of $320 million, or 63 cents a share, six months ago. Until BlackBerry gets closer to a point where analysts think it should start making money again, it's tough to justify why the stock should be doing this well.

So it should be no surprise that BlackBerry's stock has been extremely volatile this year. It has not been a smooth, straight shot up. Thus my new nickname for BlackBerry: It is the VIX (VIX) of the smartphone industry. And that volatility is likely to continue as long as many investors keep betting against the company.

Related: RIM stock in BlackBerry Bizarro World

As of the end of February, the number of BlackBerry shares being held by short sellers accounted for more than 30% of available shares. That's a staggering amount and shows how skeptical investors are about BlackBerry's future. But the BlackBerry bearishness also can, strangely enough, help boost the stock for the next few months.

Short sellers borrow stock and then sell it with the aim of returning shares at a lower price. They stand to gain a lot if the price declines and could lose big if the stock surges. So if BlackBerry keeps climbing, the shorts may have to rush to cover their position, i.e. buy the stock en masse, to avoid getting crushed. All that buying just feeds on itself.

These so-called short squeezes that happen when bears all cover at once can lead to big gains for a stock. However, they are fleeting and not a good reason to buy a stock for the long haul. That's why investors still need to be extremely careful.

BlackBerry may no longer be on the path to tech obsolescence. But it has a lot to prove.

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Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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