RBC Capital Markets is downgrading shares of BlackBerry Ltd. on Tuesday to underperform in light of the recent rip-roaring rally in the stock.

In a note to clients, RBC analyst Paul Treiber said the fundamental outlook for the company remains unchanged and does not support the sharp rally in BlackBerry shares since November 2020, barring a massive patent sale or improvement in the QNX division. BlackBerry's stock is up 207 per cent on the New York Stock Exchange since the end of November. 

“Based on our view that a material patent sale or licensing settlement agreement has not occurred of the magnitude of the ~$7 billion value creation in the stock, we believe the fundamental justification for the rally in the stock to [more than] $18 per share would only stem from an improved outlook for either BlackBerry’s QNX/BTS automotive business or recurring IP licensing revenue,” he wrote.

Treiber maintained his 12-month price target of US$7.50 per share on BlackBerry’s NYSE-listed shares, indicating the potential for a 58 per cent decline in its share price. Overall, there are no “buy” ratings on the stock among the nine analysts who cover the company, with six rating BlackBerry as a “hold” and three rating it as the equivalent of a “sell”, according to Bloomberg.

BlackBerry has been among the companies caught up in a speculative frenzy in part driven by retail investors posting in a popular Reddit message group called "r/WallStreetBets", along with a short squeeze forcing investors betting against the stock to buy shares to cover their short positions. Beyond BlackBerry, that phenomenon ​has led to a parabolic rally in shares of the likes of GameStop Corp., Express Inc. and Nokia Oyj.