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Why Did BlackBerry Ltd. Stock Rise +8% on Wednesday? Time to Buy?

The stock of BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) recorded a significant 8.58% gain on the TSX to $12.15 and had a 7.7% rally on the NASDAQ market on September 20 by market close.

There was a significant announcement by a leading autonomous driving technology player, Delphi Automotive Plc (NYSE:DLPH), that has entered an important strategic partnership with BlackBerry in an arrangement in which BlackBerry QNX will become the operating system to run Delphi’s autonomous-driving technology to be launched by 2019.

This is great news for current BlackBerry investors.

Delphi Automotive, a global player in self-driving technology, has directly endorsed BlackBerry’s QNX software offering, not only as a safe and secure platform for autonomous driving systems, but also as a mission critical operating system that can be safely relied on in the rapidly developing future self-driving car market.

The partnership swings BlackBerry deeper into the autonomous-driving game — much more clearly than the Ford deal, where the car maker did not openly make clear its plans regarding the use case for a BlackBerry operating system in future self-driven Ford vehicles.

While it is yet to be seen if QNX for autonomous driving will run in as many cars as the infotainment version, which got ported to as many as 60 million vehicles, there is a significant chance that BlackBerry may increase its revenue per vehicle beyond the US$3-5/car range that CEO John Chen once guided concerning infotainment.

Combining the latest Delphi deal with the previously announced Qualcomm and Ford deals places BlackBerry as a provider of a trusted, secure, tried-and-tested, mission critical operating system, which may become a key tech ingredient to the new autonomous driving industry, where any security breach or system failure could prove fatal.

Is the stock on a sustained recovery path now?

At a closing price of $12.15 on Wednesday, BlackBerry’s stock is up more 31% from its January 2017 trading range of ~$9 a share, making it one of the outperforming stocks for 2017 to date.

However, the stock has shed a lot of value after hitting a high of $15.82 in early June, and a rating downgrade from Goldman Sachs in August did not do the stock any good.

There could be hope for more recovery after BlackBerry recently announced a deal with Fleet Complete in a partnership to deliver trailer and cargo visibility benefits to the logistics industry, and we may see some improved revenue growth from its Radar business line in the coming quarters.

My biggest worry about BlackBerry’s valuation is that, currently, the stock is very much a hype-driven stock whose volatility is fueled by swinging market sentiment mainly fed from rumour and mere speculation.

BlackBerry’s revenue heads and bottom line are not showing the desired growth rates yet, especially if we remove the May 2017 US$940 million Qualcomm arbitration award.

The latest Delphi deal announcement has come just days before a “dreaded” earnings announcement on September 28. BlackBerry earnings have been one disappointment after another as revenues continue on a downward trend.

It won’t be surprising if the September 20th gains are wiped away after a not-so-encouraging quarterly report next week.

Foolish  bottom line

The latest Delphi deal is a strong validation for BlackBerry’s security prowess that the company frequently boasts about, and QNX is clearly a rising contender in the game-changing self-driving car market.

However, there aren’t any hard numbers concerning potential unit pricing in the 2019 product yet, making the current rally a purely speculative move that may lose steam if there is disappointment in the coming earnings call.

The Qualcomm award provided good price support, but more visibility on revenue growth may be necessary to give BlackBerry stock a sustainable valuation premium.

If you’re bullish on BlackBerry prospects, the coming earnings call may provide a better entry point if the numbers aren’t impressive.

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Fool contributor Brian Paradza has no position in any stocks mentioned. David Gardner owns shares of Ford. Tom Gardner owns shares of Qualcomm. The Motley Fool owns shares of Ford and Qualcomm.

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