BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) has been on a tear lately, and contrarian investors have been profiting big time from the recent rally in the stock, but is this rally going to fall back to Earth like previous rallies? Or has the company finally turned a corner?
BlackBerry has been making the move from a hardware company to a software company, a transition which I was first skeptical of, but it appears that the management team has been executing smoothly so far.
Hardware is a tough business to be in. BlackBerry couldn’t keep up, and that’s why it exited the business altogether, but you may be wondering how the new BlackBerry KeyOne was created if BlackBerry is focusing its efforts on software and not hardware.
BlackBerry-branded devices are still being produced, as the company has licensing agreements with other firms to create new devices like the KeyOne. The KeyOne is one of the latest BlackBerry-branded phones with the old-fashioned look of the physical keyboard, but it’s not actually manufactured by BlackBerry. It’s produced and distributed by a Chinese partner called TCL.
The KeyOne still uses the BlackBerry brand, but it’s important to note that BlackBerry isn’t actually spending money or effort in designing new devices. It simply collects a royalty per phone sold for allowing partners to use its brand.
Shifting from hardware to software
QNX is a promising project that could make BlackBerry great again. The company announced a new deal with Ford Motor Company (NYSE:F) which allows Ford vehicles to use the QNX operating system. QNX is considered one of the more secure operating systems out there, and with a lot of cyberattacks going on these days, the QNX operating system is going to receive more attention.
BlackBerry is embedding QNX into autonomous cars, which could be a gigantic opportunity for BlackBerry to get back on the map. The recent deal makes BlackBerry a compelling stock for contrarian investors, but the autonomous car operating system space is extremely competitive. It’s difficult to say whether or not the QNX operating system will be the go-to software for the self-driving cars of tomorrow.
Takeaway
Although revenue has been slipping over the past few years, BlackBerry has been improving its bottom line, and the company could be ripe for a rebound as its growth prospects in the software space sound very promising.
I think BlackBerry is an intriguing contrarian play, but keep in mind, the stock is not without risks. Volatility is pretty much guaranteed because headlines could easily send the stock soaring or plummeting.
If you’ve got a stomach of steel and you want to ride a rebound, then BlackBerry is definitely a name you should keep on your radar. Don’t bet the farm on it though.
Stay smart. Stay hungry. Stay Foolish.
