2 Big Reasons to Avoid BlackBerry Ltd. and 1 Stock to Buy Instead

BlackBerry Ltd. (TSX:BB)(Nasdaq:BBRY) has had a great year so far, but there are still reasons to stay away.

| More on:
The Motley Fool

BlackBerry Ltd. (TSX: BB)(Nasdaq: BBRY) has had a wonderful 2014. Assets have been sold, the strategy is clearer, and profitability has improved. As a result, the stock has risen 30% so far this year. Is now the time to jump on board?

Well, not necessarily. There are still plenty of reasons to avoid the stock, and below are two of them. Then we reveal one stock you should buy instead.

1. BYOD

Part of BlackBerry’s strategy shift has involved focusing more on enterprise customers. And with that shift, the company is essentially abandoning the consumer market, at least in North America. Just look at the Passport, a phablet that has practically no appeal outside of the workplace.

But this comes with a serious problem: the growth of bring-your-own-device, also known as BYOD. More and more, companies are insisting that employees use their personal smartphones in the workplace. Initially, security concerns were holding BYOD back, but these concerns have been slowly fading. Meanwhile, employees would rather not carry two phones around. This leaves BlackBerry in a very awkward position.

2. Strong competition

BlackBerry has another big problem. Its competitors, which include companies like Apple and Google, have more marketing capabilities, deeper pockets, and plenty of determination. More importantly, these rivals dominate the consumer market.

And the environment got even tougher back in July, when Apple joined forces with International Business Machines. IBM will help Apple develop enterprise apps, and will also assist with security issues.

Worst of all, this is an industry that requires constant innovation just to hold on to existing customers. That can spell big trouble for those companies that fall behind. And falling behind is not something that BlackBerry’s competitors do very often.

1 stock to buy instead: CGI

CGI Group Inc. (TSX: GIB.A)(NYSE: GIB) may not be as well known as BlackBerry, but it is actually Canada’s largest technology company. And it has a number of advantages over BlackBerry.

CGI provides IT outsourcing and consulting solutions to businesses and governments all around the world. And unlike BlackBerry, it has a well-established position here, one that is not under threat from any consumer markets.

Also unlike BlackBerry, CGI’s revenues are generally quite sticky. Think about it — for an enterprise to switch away from CGI, there would need to be a complete IT overhaul. So it’s usually not worth the trouble. This helps insulate the company from competitors like IBM.

There’s one other thing appealing about CGI: It actually makes money. Just in the last 12 months, the company made roughly $750 million (whether measured by net income or free cash flow). So with CGI, you don’t have to hope for a turnaround.

There are other good alternatives to BlackBerry, and five of them are detailed in the free report below.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned. David Gardner owns shares of Apple, Google (A shares), and Google (C shares). Tom Gardner owns shares of Google (A shares) and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and International Business Machines.

More on Tech Stocks

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

Missed Out on NVIDIA? My Best Growth Stock Pick to Buy and Hold

A TSX growth stock is a top pick and profitable investment choice if you missed out on the ascent of…

Read more »

grow dividends
Tech Stocks

3 Tech Stocks That Could Make You a Millionaire

Given their long-term growth potential, these three tech stocks could deliver oversized returns in the long run.

Read more »

Businessman holding AI cloud
Tech Stocks

Ready to Invest in Artificial Intelligence (AI)? 2 Stocks That Are Solid Bets

These two AI stocks provide investors with strong future opportunities as AI continues to become a part of our everyday…

Read more »

Dice engraved with the words buy and sell
Tech Stocks

Is Lightspeed Stock a Buy, Sell, or Hold?

Down 88% from all-time highs, is Lightspeed stock a good buy in May 2024 and can the TSX tech stock…

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

Forget NVIDIA: 1 Tech Stock to Buy Instead

Here’s why Shopify (TSX:SHOP) stock could be a smart long-term buy for investors willing to look beyond NVIDIA’s impressive growth.

Read more »

Lights glow in a cityscape at night.
Tech Stocks

2 Artificial Intelligence Stocks to Buy and Hold for the Next Decade

Qualcomm (NASDAQ:QCOM) and another well-placed AI stock could drive substantial capital gains over the next decade. Here's how.

Read more »

Arrowings ascending on a chalkboard
Tech Stocks

This Small-Cap Stock Is up 20% This Year, and Here’s Why it Can Go Even Higher

Here's why investing in small-cap growth stocks such as Sylogist can help you beat broader market returns over time.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Tech Stocks

Up 51% This Year: This Canadian AI Stock is Still Down 65% From Its Highs – Time to Buy?

Copperleaf Technologies (TSX:CLPF) stock has shown positive momentum as the AI stock attempts a recovery. Can shares rise 180% to…

Read more »