Down about 55% in one year, BlackBerry (NYSE:BB)(TSE:BB) has become a penny stock. While shares of this security software and services provider have corrected significantly, BlackBerry benefits from increased enterprise spending on cybersecurity. However, BB stock has a low Smart Score on TipRanks, implying a weak outlook ahead.
Is BlackBerry Stock a Buy or Hold?
BlackBerry primarily generates revenue from two major software businesses: cybersecurity and IoT (Internet of Things). Despite the secular sector trends, BlackBerry stock has a Hold consensus rating based on three Hold and one Sell recommendations.
The increase in cybersecurity threats amid the digital transformation will support BlackBerry’s financials. Further, the company is also expected to benefit from the auto software demand. The auto software market is growing due to automation, digitization, and electrification.
BlackBerry expects its cybersecurity business revenue to increase at a CAGR of 10% through FY27. Meanwhile, its IoT segment’s top line is projected to grow at a CAGR of 19.8%. The company expects its overall sales to increase at a CAGR of 13% over the next five years.
Robert W. Baird analyst Luke Junk, who has a Hold recommendation on BB stock, said, “We are positive on the company’s leading auto software platform, which is meeting an industry inflection point, and believe BlackBerry IVY could be the start of something big.”
For the cybersecurity business, Junk believes that its EDR (Endpoint Detection and Response) product is now “seemingly better positioned.” However, he added that “significant acceleration overall will be needed to reach 5-year targets for this business.”
While BB stock is trading cheaply, hedge funds and insiders have been selling it. Hedge funds sold 1.2M BB stock last quarter. Meanwhile, insiders sold BlackBerry stock worth $2.7M. BB stock has an Underperform Smart Score of one out of 10, implying a weak outlook. Further, analysts’ average price target of $5.44 implies 14.1% upside potential.
Though BB has a low Smart Score, investors can find top penny stocks by using TipRanks’ Penny Stocks Screener.