Why Facebook’s (NASDAQ:FB) Struggles Could Be Good News for This Stock

As security and privacy continue to weigh on investors, BlackBerry Ltd (TSX:BB)(NYSE:BB) is becoming a more attractive buy.

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Facebook (NASDAQ:FB) has faced a lot of scandals surrounding its data and advertisements over the past year. Not only has fake news put the company under the microscope for who it sold ads to, but the Cambridge Analytica scandal also uncovered the company’s poor controls when it came to protecting user data.

All of this has put Facebook under a lot of pressure to change its ways, and although it has been promising to do so, investors still seem hesitant to buy the stock. Over the past 12 months, the stock is still down around 7%, and while it has rallied 24% since the start of the year, as have many other stocks, at around $160 it is still a long ways away from before it began its free fall, when it trading at well over $200 a share.

Facebook continues to bring in strong revenue and profit growth, but the reluctance for investors to reward the company for doing so suggests that they are taking the data privacy issues seriously and that the stock might simply be too much of a risk.

Why does this matter?

One company that could be a big benefactor of the tech stock’s struggles is BlackBerry (TSX:BB)(NYSE:BB), which has been positioning itself in the cybersecurity realm for some time. The company’s association with security and privacy have made it the anti-Facebook stock and could put it in demand, as data privacy issues remain in the mainstream.

BlackBerry’s struggles have been a little different, as the company still faces challenges with turning its business around and building a strong customer base. While from afar it looks like BlackBerry achieved no sales growth in its most recent quarter, the truth is that its mix has been changing, and it has been making progress developing and growing its new segments.

There are still many opportunities for BlackBerry to grow as it continues to build its reputation in cybersecurity. As other organizations look to protect their consumers, offering some sort of assurance will be key, and relying on the BlackBerry name is one way to accomplish that.

Is BlackBerry a buy today?

With a net loss in three of its past five quarters and no operating profit during that time, BlackBerry still has to prove to investors that it can turn a profit running its business. With gross margins of over 75% over the last 12 months, the company should be able to find a way to stay in the black. And until that happens, it’s going to be hard to convince investors that the stock is a good investment today.

While it has made progress in 2019, with the stock climbing 15%, it would still need to rise by more than 50% to get back to its 52-week high. Although I wouldn’t count on a big rally happening anytime soon, over the long term, the stock could see a lot of upside. The problem, however, is how long it might take for BlackBerry to get where it needs to be to realize that potential. For now, it’s a stock that I’d keep on my watch list, but it’s not one I’m ready to buy just yet.

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.

Randi Zuckerberg, a former Director of Market Development and Spokeswoman for Facebook and sister to CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Fool contributor David Jagielski has no position in any of the stocks mentioned. David Gardner owns shares of Facebook. Tom Gardner owns shares of Facebook. The Motley Fool owns shares of BlackBerry and Facebook. BlackBerry is a recommendation of Stock Advisor Canada.

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