BlackBerry Stock: Bulls Can Cherry-Pick Outstanding Data Points
Stock Analysis & Ideas

BlackBerry Stock: Bulls Can Cherry-Pick Outstanding Data Points

Story Highlights

In stark contrast to the company’s ancient phones that have gone out of fashion, BlackBerry’s products and services of the 2020s are modern and powerful. Indeed, with a robust automotive software segment and a thriving cybersecurity business, BlackBerry is an unexpectedly solid pick for today’s investors.

Canada-based BlackBerry (BB) provides hardware and software, as well as cybersecurity and Internet of Things (IoT) solutions. I am bullish on the stock.

Do you remember the days when former President Barack Obama proudly displayed his BlackBerry phone? Back then, full screen smart phones hadn’t dominated the market yet and little phones with keyboards were all the rage.

Of course, the times have changed dramatically and BlackBerry’s phones are considered ancient history. As a result, the company has been forced to revamp its business model, and skeptical investors might wonder whether BlackBerry can deliver timely products and services – and acceptable financial results – in the 2020s.

That’s a reasonable concern, and BlackBerry’s latest round of fiscal results includes data points for both the bulls and bears to feast on. Whether you choose to view the glass as half-empty or half-full is up to you, but the data indicates that certain business segments could add significant value to BlackBerry this year.

On TipRanks, BB scores a 3 out of 10 on the Smart Score spectrum. This indicates a potential for the stock to underperform the broader market.

The Clear Market Leader

To be honest, ever since the advent of smartphones, BlackBerry stock just hasn’t been able to get off the ground. Plus, the past year has been rough on BlackBerry’s stockholders as the share price has slid from $12 to $5 and change. Will the investors ever get any relief?

Perhaps they will, as BlackBerry seems to want to slim down and focus on its most promising business endeavors. As evidence of this, BlackBerry recently divested practically all of its non-core patent assets, selling them for a total of $600 million to Catapult IP Innovations. Hopefully, this will not only provide BlackBerry with a capital infusion, but can also help the company focus its efforts on such areas as cybersecurity, endpoint management, encryption, and embedded systems.

Speaking of embedded systems, BlackBerry just disclosed data that should solidify the company’s status as a strong competitor in embedded automotive software. Apparently, research firm Strategy Analytics has determined that BlackBerry QNX software is embedded in more than 215 million vehicles worldwide, marking an increase of 20 million compared to the previous year.

BlackBerry QNX software includes systems and features focused on safety, infotainment, digital cockpits, and acoustics middleware, among others. According to BlackBerry, 24 of the top 25 electric vehicle automakers have chosen BlackBerry QNX. Moreover, BlackBerry Executive Chairman and CEO John Chen claims that his company is “the clear market leader in safety-critical embedded automotive software.”

Is this leadership status reflected in BlackBerry’s revenue? The answer appears to be yes, as the BlackBerry QNX royalty revenue backlog has grown to roughly $560 million at the end of fiscal year 2023’s first quarter, representing a 14% year-over-year increase.

Strength in Certain Segments

Besides QNX, BlackBerry demonstrated improvement in several other important business segments during the first quarter of fiscal year 2023 (which ended May 31, 2022). First, the company generated $113 million in Cybersecurity revenue, up 6% increase year-over-year. Next, BlackBerry’s Software and Services revenue totaled $164 million, up 9%. In addition, the company’s IoT revenue grew 19% to $51 million.

Clearly, it’s time for BlackBerry’s critics to erase the mental image of ancient phones, and to appreciate the company’s remarkable evolution. Chen seems unafraid to tout his company’s segment-specific achievements, saying, “The IoT business… delivered a third consecutive record quarter for pre-production revenues,” and, “The Cybersecurity business demonstrated solid traction in the market by recording double-digit year-over-year billings growth.”

Now, this isn’t to suggest that BlackBerry posted across-the-board wins. Unfortunately, the company reported only $4 million in quarterly revenue for the Licensing and Other segment, a far cry from the $24 million recorded during the year-earlier period. Also, turning to BlackBerry’s bottom-line results, the company reported a Q1 FY2023 earnings loss of 35 cents per share on a diluted basis.

The bears will undoubtedly point out that BlackBerry is currently unprofitable, and this might even be a deal-breaker for some prospective investors. This perspective is somewhat understandable, but people should consider BlackBerry’s comeback story as a marathon, rather than as a sprint.

It’s amazing, really, to consider that BlackBerry has managed to improve its top-line results in multiple business segments. Hopefully, the company will be able to achieve profitability withing a reasonable time frame. Don’t expect it to happen this year – though anything is possible – as patience will be the key to unlocking maximum value from BlackBerry stock.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, BB is a Hold, based on four Hold and one Sell ratings. The average BlackBerry price target is $6.04, implying 5.04% upside potential.

The Takeaway

At the end of the day, investors should expect improvement, not perfection, from BlackBerry. It’s not easy for a company to completely reinvent itself after a devastating defeat, but BlackBerry might just be in the early chapters of a compelling comeback story.

This doesn’t mean that holding a long position in BlackBerry stock will be an easy ride. The shares could slide below $5 and stay there for a while. So, assess your risk tolerance before jumping into the trade. If you’re ready, though, then feel free to take a chance on BlackBerry as an investment could bear fruit in the coming years.

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