Here Is Why BlackBerry Ltd. (TSX:BB) Stock Will Resume its Upward Move

As BlackBerry Ltd.’s (TSX:BB)(NYSE:BB) turnaround gathers pace, its stock offers great value to contrarian investors who are willing to wait.

| More on:

It seems investors won’t touch BlackBerry Ltd. (TSX:BB)(NYSE:BB) stock, unless the company has a great new deal to disclose. This short-term approach explains the roller-coaster ride in the shares of this technology company, which is in the middle of its turnaround.

After reaching a multi-year high early this year, BlackBerry stock has lost 17% from the 52-week peak reached early this year. This weakness comes at a time when Waterloo, Ontario-based BlackBerry has consistently beat analysts’ expectations for its quarterly earnings. The company also announced some major deals that showed the company’s turnaround strategy is on track.

In the past quarter, BlackBerry said that it will license its QNX software and Certicom security technology to Jaguar Land Rover Ltd., making its entry in the luxury connected-car market. The company also won a deal to provide security capabilities to mobile products produced by Microsoft Corp., its once bitter rival in the smartphone business.

News about its partnership with Baidu for the autonomous car project development, and the release of BlackBerry’s Jarvis, a tool for car software engineers and developers, pushed the stock price to above $18 a share early this year for first time in five years before it plunged back to around $15 a share at the time of writing.

Earnings momentum

Many analysts on the street expect that BlackBerry will continue to post strong earnings, as its turnaround from a smartphone maker to a company focused on software security and services business gathers pace.

In the last quarter, while beating analysts’ profit estimates, the company predicted a strong billing cycle at its high-margin software and services business, adding that about 70% of that revenue was recurring, excluding intellectual property licensing and professional services.

The other main growth driver for BlackBerry is its software solutions to secure networks from hackers and other data breaches. That business is also showing strong growth. All G7 governments and 15 of the G20 governments are BlackBerry Secure customers, and so are an increasing number of enterprise companies that are concerned about cybersecurity. The company has also made a number of strategic acquisitions in the security space that added value to the BlackBerry Secure platform.

The bottom line

I have no doubt that BlackBerry will sustain its momentum as its CEO John Chen is targeting the right growth areas where the company has a competitive advantage. But turnaround stocks don’t move in one direction, generally. Contrarian investors who want to buy this stock will have to show patience with a minimum five-year time horizon to truly benefit from this bet. If you have that much patience, then I see a lot of reasons to be excited about this stock.

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 Haris Anwar owns shares of BlackBerry. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. David Gardner owns shares of Baidu. Tom Gardner owns shares of Baidu. The Motley Fool owns shares of Baidu and BlackBerry. Baidu and BlackBerry are recommendations of Stock Advisor Canada.

More on Tech Stocks

Shopping and e-commerce
Tech Stocks

Can Shopify Recover to New All-time Highs in 2022?

With more than 1.7 million merchants on its platform, Shopify (TSX:SHOP)(NYSE:SHOP) is undoubtedly a core platform for SMBs. The company’s software-as-a-service platform …

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

The 5 Best High-Growth TSX Stocks to Buy on the Dip

The broader market selling, primarily in high-growth stocks, provides a solid opportunity for investors to buy future winners at lower …

Read more »

Coronavirus written newspaper close up shot to the text.
Tech Stocks

The 2 Best Tech Stocks to Buy Today for Low-Risk Investors

Overvalued tech stocks are undergoing a major correction after inflating on the back of high liquidity from fiscal stimulus packages. …

Read more »

Choose a path
Tech Stocks

Is Ripple Primed for 100% Growth in 2022?

From an investment perspective, most cryptocurrencies seem similar. Almost all of them seem volatile, and while some get more limelight …

Read more »

Tech Stocks

Tech Crash: 2 Tech Stocks Analysts Have Sliced in Half

The TSX has continued to wax and wane over the past week. After a huge fall on Monday, shares started …

Read more »

Hand holding smart phone with online shop concept on screen
Tech Stocks

Shopify Stock Selloff: Could it Turn Around in February?

Shopify (TSX:SHOP)(NYSE:SHOP) continues to be one of the worst-affected stocks amid the ongoing market selloff. After posting its worst weekly …

Read more »

analyze data
Tech Stocks

TFSA Investors: Is the Tech Crash Over?

It’s been a hard time for Tax-Free Savings Account (TFSA) investors already in 2022. Almost immediately after ringing in the …

Read more »

value for money
Tech Stocks

4 Cheap TSX Stocks to Buy Under $50

The recent selloff in equities has led to a sharp pullback in high-quality TSX stocks. Many of these Canadian stocks …

Read more »