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BlackBerry Ltd. Stock: Will the Explosive Growth Continue in 2018?

BlackBerry Ltd. (TSX:BB)(NYSE:BB) has handed impressive returns to its investors this year.

Gaining 46% so far this year, BlackBerry stock is proving to be a great turnaround story. The stock’s upward movement, which started this spring, has not yet lost its momentum. At the time of writing, the stock was up 3% for the day, trading at $13.51.

Entering 2018, however, the biggest question in investors’ minds is, “Will this troubled technology company repeat this performance next year?”

Early signs show that the turnaround strategy of the chief executive officer John Chen is working.

Strategic shift

BlackBerry has made a strategic shift to making its software and services business the key driver for its long-term growth after its smartphone business collapsed.

The QNX operating system, which powers automobiles’ infotainment systems, is forecast to be the second-largest component of the firm’s software sales after its enterprise mobility management business.

In the most recent quarter, BlackBerry’s revenue from this division hit a record, helping the Ontario-based company to post US$19 million in net income for the second quarter — a swing to profit from the loss it reported during the same period a year ago.

Its key software and services revenue rose $185 million, making up three-quarters of the total sales for the period.

“We made great progress in all our key growth initiatives,” Mr. Chen told analysts on a conference call in late September. “All of these accomplishments position us well for future growth.”

New deals

A flurry of new deals the company signed this year further cemented the market view that Mr. Chen is on a right track.

These deals included a partnership agreement with Britain-based Delphi Automotive PLC to provide the operating system for its autonomous driving system, and a reselling partnership with Fleet Complete to integrate BlackBerry’s Radar with its tracking solutions.

These new revenue streams are helping BlackBerry improve its outlook for this fiscal year, which ends on February 28. The company expects revenue in the range of $920-950 million for the full year, above analyst consensus of $919 million.

But this upward move for BlackBerry investors has not been without bumps. Since October, BlackBerry has lost three of its top executives, who left the company for various reasons.

The latest one was the chief operating officer Marty Beard, who, according to a press report, will leave the company to deal with a family health situation. Beard helped oversee BlackBerry’s transformation from making smartphones to focusing on its growing the software business.

The bottom line

There is no doubt that BlackBerry has created a positive momentum that is likely to keep the stock on a strong footing in 2018. The company’s management has been successful in identifying the problems and laying out plans to put the business back on a growth trajectory.

For me, BlackBerry remains a speculative play, unless we see a sustainable demand for its products and services and return to a meaningful profitability. I think the first quarter of 2018 will be a good time to make a long-term call on the BB stock after seeing the full-year earnings results.

Till that time, it is better to stay on the sidelines.

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Fool contributor Haris Anwar has no position in any stocks mentioned.

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