Investors are pleased with the recent market rally. Stock prices are moving higher, but there are still bargains to be had. One Canadian tech stock looks like it has significant upside.
If you’re not up to date, you may be surprised to hear that BlackBerry Ltd. (TSX:BB)(NYSE:BB) stock is the next big thing. In fact, it could eventually join tech giants like Google. Yet its current market cap is pegged at only $3 billion.
In the decade to come, BlackBerry shares could potentially rise tenfold. But that’s looking at things from a long-term basis. If the recent market rally is sustained, there could be ample near-term upside as well.
BlackBerry is brand new
BlackBerry isn’t the company it used to be. In 2008, it held a 20% global market share for smartphones. In 2019, it didn’t produce a single phone. If BlackBerry isn’t a phone company anymore, what is it?
In recent years, BlackBerry has spent billions to reinvent itself. Today, it’s a cybersecurity software company focused on next-gen technologies. This focus should give shares a bump during the market rally.
Historically, BlackBerry’s smartphones failed due to poor user interfaces. Compared to an iPhone, using a BlackBerry device felt like using a rotary phone. But what the company didn’t fail on was security. Up until their dying days, BlackBerry phones were regarded as hyper-secure products, trusted by celebrities, politicians, and billionaires.
The company has leveraged that reputation to build new security products. But instead of building hardware, the company is focused on software offerings. For example, its Cylance division uses artificial intelligence to detect threats before they occur.
The company’s QNX platform, meanwhile, secures self-driving vehicles from hackers. It’s already installed in more than 150 million vehicles worldwide.
This isn’t the BlackBerry of yesterday by any means. The company is now financially stable with a growing revenue base filled with high-margin, recurring sales. The market rally could send shares soaring.
Buy the market rally?
The coronavirus pandemic brought stock prices down rapidly. The market rally has brought indices higher, but contrary to perception, this has not been a broad-based increase. Some stocks are soaring, while others remain close to their pandemic lows.
Which stocks are soaring? High-growth stocks like Google and Shopify. These companies will continue to grow regardless of a recession or renewed pandemic. BlackBerry fits this mold, even if the market hasn’t realized it yet.
Today, BlackBerry stock trades at just 2.5 times sales. Google, for comparison, trades at 5.8 times sales. But a better comparison would be with other cybersecurity stocks. CrowdStrike, for example, trades at an astounding 27.2 times sales!
Of course, BlackBerry doesn’t deserve these valuations in the near term. Sales traction is just starting for many of its segments. It could take years to fully realize the value of its technology.
Yet the market rally seems to be rewarding tech stocks, specifically software stocks, that can grow sales regardless of the economic environment.
With such a large discount versus its larger peers, expect BlackBerry shares to experience a rebound if markets continue higher. Long term, this looks like a great buy-and-hold candidate.
One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting...
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago - before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!
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.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Alphabet (A shares) and Alphabet (C shares). Tom Gardner owns shares of Alphabet (A shares), Alphabet (C shares), and Shopify. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Shopify, and Shopify. The Motley Fool owns shares of CrowdStrike Holdings, Inc. The Motley Fool recommends BlackBerry and BlackBerry.
Fool contributor Ryan Vanzo has no position in any stocks mentioned.