BlackBerry (TSX: BB)(NYSE: BB) got popped following the release of second-quarter results, prompting many investors to collectively throw in the towel on the transforming company that begs for a bit of patience.
Indeed, Prem Watsa looks pretty silly right now with his huge BlackBerry stake and his recent Stelco investment, which continues to fall further into the abyss. The Fairfax Financial boss can’t seem to catch a break these days.
Although investors are losing faith in both Watsa and his firm, those with a longer-term investment horizon know that Watsa is a man who’s willing to wait for years, through heck and high water, for his holdings to appreciate to what he believes is their true worth.
That’s commendable. And in the case of BlackBerry, investors should pounce at the opportunity to get in on shares as they touchdown with multi-year lows.
At the time of writing, BlackBerry is down about 60% from 2018 high, and although investors continue to rush for the exits, I do see an opportunity for long-term investors to pay a dime to get a dollar.
Many investors widely misunderstand the company’s trajectory, which is why the stock has sold-off so viciously over the past year.
For the last quarter, BlackBerry dropped the ball on revenue due to some poor performance from the enterprise software solutions (ESS) segment, which drove all the attention away from encouraging growth from the recently-acquired cybersecurity firm Cylance.
The second-quarter flop was partially blamed on ESS sales execution. Moving forward, management shot down concerns over competition and expects meaningful improvement in future quarters.
Some analysts have been downgrading the stock over lacklustre top-line growth and questionable margins. Still, RBC Capital Markets put it best after reiterating its sector perform rating alongside its $7.50 price target.
“In our view, stronger growth would be a catalyst for the stock, though visibility is low at this point,” said RBC.
Visibility is indeed low, which is why BlackBerry stock cratered a lot more than it should have. The company could re-accelerate its growth at a whim, however, so investors should believe management when they say they expect improved performance in the coming quarters.
The bar has been lowered, and there are a lot of attractive pieces to the puzzle that is BlackBerry.
Management continues to tout Cylance’s competitive advantages. As the company moves on from a forgettable Q2, investors should be backing up the truck before the slightest of improvements to growth sends the stock correcting back to the double digits.
Prem Watsa probably knows that BlackBerry’s true worth lies somewhere in the double digits. And at this juncture, investors have a chance to buy the name at just $6 and change.
If you’re not rattled by volatility and can hold onto the name for many years, only then do you have my blessing to place a big bet on the tech titan that’s now heavily out of favour with Bay Street investors.
Stay hungry. Stay Foolish.
