The Motley Fool

Why Now Might Be a Great Time to Buy BlackBerry Ltd (TSX:BB)

BlackBerry (TSX:BB)(NYSE:BB) has failed to generate much excitement this year. Since January, the stock has dropped more than 15% in value as sales continue to underwhelm investors.

While the company has shown progress in its new segments, its legacy business model still makes prior year results a bit stronger by comparison. And in only two of its last five quarters has the company been able to turn a profit.

Last week, however, the company made a big move in acquiring cybersecurity company Cylance, which uses artificial intelligence (AI) to help protect its consumers. The company has over 3,500 customers and generates a lot of recurring revenue that can complement BlackBerry’s current products and services very well.

The US$1.4 billion purchase effectively gives BlackBerry a way to accelerate its position in the marketplace. By adding Cylance into the fold, BlackBerry can quickly and easily add some much-needed sales growth into its financials and gives investors a reason to believe in its vision.

Stuart McClure, Cylance’s CEO, was very hopeful that the two companies will be able to achieve much greater successes together: “We are eager to leverage BlackBerry’s mobility and security strengths to adapt our advanced AI technology to deliver a single platform.”

Why this should be important to investors

Investors should see this as good news for BlackBerry, as the company was able to add a complementary business into its operations without taking on any debt.

The cash deal shows that BlackBerry has done a good job of accumulating funds for a big move like this, and that should encourage investors that it isn’t going to be reckless in its cash management nor in acquiring companies for the sake of growth.

This was a calculated move by a company, which has shown it is committed to a path down cybersecurity. And given all the highly publicized problems we’ve seen over the past few years involving many big-name companies and cybersecurity, there’s clearly demand for these types of products and services.

The more that BlackBerry can build recognition in the cybersecurity space, the more opportunities it will be able to leverage and build on. The move also helps expand BlackBerry’s clientele and gives it the opportunity to sell complementary products and services to them.

Why BlackBerry is a good buy

BlackBerry is trading near its 52-week low, and at a price-to-book multiple of around 2.5, there’s good value here. While investors might be concerned about the company’s profitability, its ability to stockpile cash for a big deal like this suggests there aren’t any concerns in the near future.

And with a lot of potential demand for its products, the long-term trajectory of the company remains strong. In recent quarters, BlackBerry has shown strong growth under its new business model, and there is hope that, slowly and steadily, it is turning things around.

While it may no longer be a hugely popular tech stock, that may be a good thing for BlackBerry, as the company is now focused on building a disciplined brand that can grow strategically and profitably.

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Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of BlackBerry. BlackBerry is a recommendation of Stock Advisor Canada.

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