In this article, I’m going to highlight two stocks that are on my watch list right now. These are meme stocks (or potential meme stocks) that I think have excellent upside in their own right, aside from the meme stock trend.

Meme stock watch: Cineworld

While not necessarily being a meme stock yet like sector peer AMC, Cineworld (LSE:CINE) certainly is a comparable company. And I think it’s a possible meme-stock-in-waiting. With pandemic restrictions ended, reopening is key for both cinema operators. As we all yearn for dinner and a movie, expectations are that both will perform well over the near term.

Cineworld has seen a big price swing in a relatively short amount of time. The shares went from around 25p in late 2020 to nearly 125p early this year. Currently, Cineworld shares are up over 64% compared to their price of a year ago. So it’s trending in the right direction.

Yet Cineworld is also one of the most-shorted UK shares right now, meaning there are plenty of experienced investors betting it will fall. Given its relatively low price per share and high short interest, Cineworld exhibits some key meme stock traits. Should the price fall, this is a stock I’ll be considering for my portfolio.

Of course, there are still concerns around how robust its recovery will be. New Covid variants could see a return to lockdown measures, which could mean cinemas having to close again. Should additional lockdowns be imposed, Cineworld is one UK share that could suffer. These are risks I’m monitoring closely with Cineworld shares and it’s not a Buy for me at present.

BlackBerry

One company that comfortably falls into the meme stock category is BlackBerry. This former smartphone-maker-turned-software-company has been on my watch list for some time.

BlackBerry’s meteoric rise this year was the result of two key catalysts, I feel. Of course, frenzied retail buying played a huge role in taking BlackBerry shares from around $5 per share in late 2020 to nearly $30 in January. This was one of the first meme stocks, and continues to hold this title.

However, in late 2020, BlackBerry also announced a key partnership with Amazon to develop BlackBerry IVY. This is a scalable, cloud-connected software program aimed at car manufacturers. This platform allows for real time data and analytics functionality to improve the passenger experience in the connected car market. Given the growth we’ve seen in this sector, this is something I’ve been excited about since late last year.

That said, BlackBerry remains a turnaround stock. The company’s transition to a pure software business hasn’t been as smooth as I’d like to see. In fact, two of the past four earnings reports undershot revenue expectations. 

However, this is also a company with excellent long-term growth prospects relating to its Amazon partnership and exposure to the connected vehicle market. Sure, there’s potential near-term potential. But I’m thinking longer term with this stock, and watching it closely.

The most famous meme stocks are GameStop and AMC. A cursory glance at their share price history over the last six months tells me that these two shares are best used as speculative bets rather than as serious investments, due to stock prices that are wildly detached from their fundamentals. GameStop’s share price has varied from between four dollars to $350 in the past year and is $167 today. Meanwhile AMC was under two dollars in January, hit highs of over $60 in June, and is currently at $36.

Could these stocks go higher? My fellow Fools have covered this in detail, but it is impossible to know when to time your move. However, I have identified one technology meme stock to buy in July that I think has great long-term potential. If it ‘rockets to the moon,’ that is an added bonus.

A future technology powerhouse?

I believe that Blackberry (NYSE: BB) is a meme stock with great long-term potential, though not on fundamentals alone. Its latest earnings report a fortnight ago paints a varied picture; the company only brought in $174m compared to $206m in the same quarter last year. On the other hand, losses have reduced from $636m last year to just $62m in last quarter’s earnings. This demonstrates that the company’s strategy may soon bring a return to profitability.

Business software solutions

It is possible some readers still think of Blackberry as just a meme stock, one of the losers in the mobile phone war. This is no longer an accurate assessment. The company has transformed from hardware sales to business software solutions. 60% of its revenue comes from cybersecurity, a global industry worth $165bn last year and projected to rise 10% year on year.

A further quarter of revenue comes from its Internet of Things (IoT) department, which specializes in digitising the physical world by providing machine to machine connectivity. As the world becomes more connected, revenue in these two departments could skyrocket; independent research puts the value of IoT at $11trn by 2025.

Auto disrupter?

Blackberry is also working with Amazon to deliver its QNX OS software, used worldwide in trains, ventilators, factories, and medical robots. This software is also utilised in advanced driver systems in 175m cars on the roads today. This represents an increase of almost 400% in the past five years, and could increase further as society moves towards electric only driverless vehicles. Furthermore, its highly anticipated automotive analytics Ivy platform is launching next year. This will further cement the company’s partnership with almost every major car manufacturer, including Ford, GM, Toyota, and Volkswagen. 

However, the share price has been rocky over the past 12 months. It spiked to over $25 in late January because of the Reddit hype, and is at $11.79 today, with some analysts expecting it to fall further. As an original meme stock, there is always a chance it could spike again, but this price makes it an attractive meme stock to buy in July for my portfolio.

Blackberry’s share price has risen by 170% over the last 12 months as the firm’s turnaround has gathered pace. The former smartphone maker has pivoted into cybersecurity and announced a partnership with Amazon last year. Brokers expect a return to profit next year. Should I start buying BB stock?

This ain’t no start-up

Blackberry isn’t a start-up with big hopes and few customers. This business generated revenue of nearly $900m last year and is expected to return to profitability next year.

Key products include the group’s Spark suite of cybersecurity products, and QNX. This is an operating system that installed in more than 175m vehicles worldwide and is also used in other automation environments.

Analysts are bullish on the outlook for the business. The latest consensus forecasts show Blackberry generating a $60m net profit next year. That figure is expected to triple to $182m the following year.

I think the company could be on the verge of a winning streak.

Facing tough competition

Of course, Blackberry isn’t a sure thing. A growing number of companies are applying artificial intelligence techniques to cybersecurity. One interesting example is Darktrace, which recently listed on the London market.

Another risk is that in my experience, it’s quite rare for companies to reinvent themselves successfully. More often, they tend to fall short and get left behind by newer businesses with less baggage.

So far, I have to admit that I’m impressed with Blackberry’s progress. But this business is still losing money and its cash balance has been falling. Even if this business does turn profitable next year as expected, is Blackberry’s surging share price already up with events?

Blackberry share price: what I’d do

If Blackberry becomes the next big meme stock, then I think the share price could rise quickly and unpredictably. I can’t predict how this might go.

What I can say is that the Blackberry share price already looks fully priced to me, based on investment fundamentals. Putting this into numbers, BB stock currently trades on 200 times 2022/23 forecast earnings. This multiple falls to 49 times earnings in 2023/24.

If Blackberry’s earnings meet broker forecasts and continue to grow strongly in 2024/25, then I think the shares could start to look quite affordable.

The problem for me is that situation might be three or four years in the future. Given Blackberry’s mixed track record, I don’t feel comfortable paying for so much growth in advance.

My verdict on Blackberry’s share price? For me, the stock is already high enough. The only reason I can see to buy Blackberry today is that the stock could surge on a wave of retail trading. That’s too speculative for me, so I won’t be buying.

The January Reddit craze quickly subsided, and the price fell back, but still retained some of its gains. Since then, BlackBerry shares have been slowly declining. But that was only until June, and the BlackBerry share price has now been launched upwards again.

It’s doubled in the past month and stands at a shade under $16, as I write. What’s behind it this time? Will we see a climb beyond January’s peak, and are BlackBerry shares a buy right now? It’s not easy to see a good reason behind the current bullishness. At least there’s none that I can see.

Software potential

BlackBerry is a very different company to the one that made those funny phones with keyboards all those years ago. It doesn’t make those any more, having transformed into a software developer. The company now does cybersecurity software and also for the automotive industry. I reckon those are areas with considerable long-term potential. But BlackBerry doesn’t appear poised for any great breakthrough or important development any time soon.

Forecasts for the year to January 2022 suggest a fall in revenue of 10%, to around $824m. As for profits, analysts have BlackBerry down for a loss per share of five cents for the year. So its shares have no forward P/E multiple to go on. And with the company on a market-cap of almost $9bn, we’re looking at a price to sales ratio of nearly 11.

BlackBerry shares attraction?

That doesn’t scream ‘buy’ to me, so what’s the attraction? Some US commentators suggest it’s all about shorting. BlackBerry is a big target of the shorters right now, with around 10% sold short at the moment. So is all the buying an attempt to force a short squeeze for a quick profit? It might well be.

I see a couple of lessons for long-term Foolish investors here. Perhaps the most obvious is don’t take any notice of social media. Ramping on Reddit is most definitely not a good reason to buy BlackBerry shares, in my book.

It was bad enough in the old days when short-term chancers would pump up shares on investing forums in the hope of making a quick killing. But social media draws in those who otherwise have little interest in, or knowledge of, stock market investing.

Valuation, valuation

The other lesson is that fundamental valuation is what counts. Sure, stocks can have very high valuations on traditional measures, but that is often justified. Plenty of companies have grown to outstrip their early high valuations, and then gone on to even greater things. I’m just not sure I’m seeing that with BlackBerry.

So are BlackBerry shares a buy at $16? Given that the price seems to be driven by nothing rational at the moment, they’re not a buy for me right now.

However, in the past two months, it has made a remarkable comeback. At the time of writing, Blackberry shares are trading at $22. So, does this mean it’s now a ‘must-buy’ tech stock with an exciting future ahead? Let’s not get ahead of ourselves.

Blackberry stock rallies

Nowadays, BlackBerry is a software security firm rather than a smartphone manufacturer. Security is an increasingly vital part of our world, so there’s a clear need for such an offering. And, in the past few weeks, a few newsworthy announcements have helped to boost the BB share price.

In December, BlackBerry announced a joint venture with Amazon Web Services to develop a cloud-based platform for the auto industry. Shareholders welcomed this news. Then, earlier this month, a lawsuit between Facebook and BlackBerry was reportedly settled, which helped to boost sentiment around the share.

Shortly after, the company announced it had sold 90 smartphone patents to Huawei Technologies. This made an exciting development, as Blackberry reportedly has around 38,000 patents in its library. The announcement of a partnership with Chinese search engine Baidu in relation to electric vehicle tech followed.

While all these news items gave an understandable boost to the BB share price, the extent of the rally, up 220% in a month, is surprising analysts and investors alike.

Are these shares rising in a short squeeze?

On Monday, a news release stated BlackBerry didn’t know of any reason for the recent share price rally. However, there’s speculation it follows on from the incredible story of GameStop’s (NYSE:GME) meteoric share price rise.

The GME share price rise over the past few days has been gripping to watch. Reportedly over 2m amateur investors on a Reddit board called wallstreetbets banded together to buy up shares in the ailing video game store and squeeze out the hedge funds betting against it.

Robinhood is a popular retail investor app used for buying and selling shares in the US, and many of these amateur investors use it. GameStop stock has risen over 740% year-to-date, mirroring a Robin Hood tale of stealing from the big bad hedge funds to feed the poor. Some investors involved have reportedly transformed tiny sums of money into life-changing returns. However, the conspiracy theories on social media are running wild and now its share price has gone so high there are concerns the U.S. Securities and Exchange Commission (SEC) will step in to halt the action.

In the midst of the mayhem, investors’ set their sights on additional shares to buy, one of which appears to be BlackBerry. That’s because it’s another share with a high number of shorts, (hedge funds betting against it). This helps explain why BlackBerry stock has rallied to such an extent.

As exciting as it is to witness, BlackBerry shares are not a viable buy for me at today’s price. The price-to-earnings ratio and earnings per share are negative, and it doesn’t offer a dividend. The excitement around these shares is unlikely to last and may even result in legal intervention. Hopefully, it will not lead to too many casualties.

But the technology has been eclipsed by the now-standard Apple iPhone/Android form factor, with bigger screens and on-screen keyboards, and BlackBerry sales have crashed — and the share price has gone with them, closing at just $9.60 on 13 January.

Loyal users

BlackBerry devices do have a loyal, if relatively small, following, including US President Barack Obama. But even its latest offering, the $450 BlackBerry Classic focused on security and battery life, is unlikely to appeal to many outside the existing circle of aficionados.

It’s not surprising, then, that BlackBerry shares soared 30% on the claim that Korea’s Samsung has made an offer to buy out the company. A report by Reuters told us that Samsung has offered up to $7.5bn (approx £4.9bn), for a premium that could be as high as 60% on the previous close. The price responded on 14 January with a 30% hike, to finish the day at $12.60.

But it’s not a done deal, as BlackBerry has responded with denials saying “BlackBerry has not engaged in discussions with Samsung with respect to any possible offer to purchase BlackBerry” and refusing to comment further. The share price fell back in after-hours trading in response.

Why?

But what would Samsung, the maker of top-selling Galaxy smartphones want with BlackBerry anyway?

Well, it’s not going to suddenly shift to keyboard-based designs again, so it’s got to be after BlackBerry’s patents — especially on technology covering security. With more and more governments trying to legislate rights to snoop on private and business data, it would be hard to convince the world that you’ve got encryption and security sewn up based solely on Google’s Android platform. And a takeover would remove a competitor from the market too.

But what should BlackBerry shareholders want now? It’s really hard to say.

Return to growth?

There’s still that core following, and chief executive John Chen has said he hopes the company can return to revenue growth by 2016 — although nobody is holding their breath on that one. It could take years before BlackBerry’s profits and outlook are sufficient to justify a 30% uptick in the share price, even if Barack Obama does love the things.