Should Investors Include BlackBerry Stock On Their 2021 Watchlist?
As we finish a year like no other, investors are looking for their next best stocks to buy in the stock market. That said, nobody knows for sure if stocks could replicate their gains in 2020 this year. As a result, investors are looking at relatively cheap stocks that could potentially rally monstrously this year. One of those that stood out recently is BlackBerry (NYSE: BB). The stock has made a grand start to 2021, with its stock rising nearly 50% year-to-date. With the company’s enormous potential, it is easy to forget that BB stock has been trading sideways for most of 2020.
BlackBerry stock has surged 32% in the last two trading sessions. This came after the company announced that it has sold 90 smartphone technology patents to Huawei. You could say that this move represents a shift away from the smartphone space. The surge in stock price could also because it had settled a dispute with Facebook (NASDAQ: FB) related to patent royalties.
Given the recent surge in stock price, BB stock is clearly on many investors’ radar. But the real question here is, is BB stock a buy at this valuation? To answer this question, perhaps let’s dive a little deeper into what the company has to offer before making any decision.
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From Hardware To Software
Like many, your first encounter with BlackBerry would most probably be with its smartphone. Perhaps you didn’t own a BlackBerry yourself. But I am sure that you knew someone who did. Many used to swear by BlackBerry’s keyboard. It was probably the most high-tech phone you could find before Apple’s (NASDAQ: AAPL) iPhone began to steal the show.
Well, there’s no point to dwell in the past with BlackBerry. While it may have lost its mojo with its powerful smartphone back then, the company is actually equipped with a huge patent portfolio in cybersecurity, internet of things (IoT), and automotive technology. All these are major trends happening in the stock market today. While BlackBerry’s portfolio holds great promise in theory, it has not translated into profits. Should the company be able to monetize its patent strategically, I won’t be surprised if it brings significant gains to shareholders.
More Partnerships Leads To More Growth
Recently, BlackBerry’s collaboration with Amazon.com’s (NASDAQ: AMZN) Amazon Web Services to develop and market its intelligent vehicle data platform, IVY, may have sparked some bullishness. Given how fast the market can move, sometimes a little momentum like this may be enough to get the ball rolling. The partnership creates ample opportunities for BlackBerry to monetize its applications moving forward. Here’s why.
The AWS platform gives BlackBerry’s IVY cloud-connectivity, scalability, and a global reach. This in turn will arm BlackBerry with a new source of recurring revenue in the automotive market, where it already has software installed in over 175 million cars. With the electric vehicle industry and automotive technology being speculated as to the industry of the future, BlackBerry’s IVY could be a game-changer for its stock.
Apart from BlackBerry IVY, the company is also strengthening its position in the cybersecurity and endpoint management solutions market through its Spark Suite and Cyber Suite platforms. The fact that these solutions have become a necessity bodes well for BB stock. While these recent offerings may have garnered a lot of attention, let’s not forget that its other mature products like QNX and BlackBerry AtHoc have been producing steady and increasing revenue streams for the company.
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Lackluster Financials May Hold Some Investors Back
The company’s financials in recent quarters may not rhyme with its image as a turnaround story. And I don’t blame you for saying that. BlackBerry’s disappointing third-quarter results could be one of the reasons why investors are taking a deep breath before piling in straight. The company’s revenue came in at $218 million, falling short of Wall Street’s expectations of $219.7 million. The lower revenue may simply be because of the pandemic-related shutdowns that lowered its QNX licensing fees. Admittedly, that weighed on its financials. Despite the unsatisfactory quarterly performance, the company expects its licensing fees and royalties to pick up in pace as the global economy improves.
Sure, the company has had a turbulent past. Downsizing from its heyday of being a $6 billion hardware company to a $1 billion software company is one bitter pill to swallow. As bad as things may seem, one thing is for sure. The company certainly appears to be in a better position today than just a few years ago. And that’s worth celebrating. For one, the company is now in a better financial position. It appears ready to capitalize on several leading technology ventures.
Despite failing to deliver on its promise in the last few years, many are speculating that BlackBerry’s transformation from a leading smartphone manufacturer to a software company could start bringing in real growth starting this year. What’s more, like many in the software business, a good part of BlackBerry’s revenue is recurring. Investors certainly like that. Its recent initiatives with Amazon and enterprise mobility management and security could offer new revenue sources. And that could bring the company to greater heights.
Given how volatile the company’s stock may be, the recent run-up has attracted a lot of attention. Perhaps, it is a sign of bigger things to come. However, if you are looking for a quick flip, the risks we are dealing with this stock may be higher. Unless you could stomach such huge swings, you may be better off waiting for the stock to take a breather before piling in. Then again, that could be just me. Analysts believe that the current valuation still looks attractive even after the recent surge. Whether it’s the increasing need for cybersecurity or the rise of autonomous vehicles, BlackBerry has something to offer. Considering all these, would you say that BB stock’s best days are yet to come? Only time will tell.