BlackBerry (TSX: BB)(NYSE: BB) stock is underrated. The market really doesn’t know what it’s missing.
Most people still remember the company as a smartphone manufacturer. Savvy investors know that it didn’t produce a single phone last year. Right now, it’s all about a booming industry: cybersecurity software.
If you look at the valuation multiples, the upside is clear. BlackBerry stock could rise anywhere between 100% to 800%. Seriously, the valuation gap is that huge.
This is an opportunity to capitalize on the market’s ignorance. If you’re looking to buy the next big thing before everyone else, this is your shot.
This is real
In 2008, BlackBerry commanded a 20% global market share for smartphones. That glorified past is far behind us, but it’s taken years to reach this point.
Four years ago, the writing was on the wall.
“The device business must be profitable, because we don’t want to run a business that drags onto the bottom line,” CEO John Chen said in 2016. “It’s time for us to get to the profitability. We’ve got to get there this year.”
Profitability never arrived, prompting Chen to admit that “devices [won’t] be the future of any company.”
This is when BlackBerry’s turnaround truly started. The firm quickly wound down its manufacturing business, pivoting instead to security software. While this may seem like a stretch, the transition made a lot of sense.
Long after everyday phone users ditched the company’s products, high-profile users like celebrities, politicians, and billionaires clutched to their BlackBerries. That’s because the company was a clear leader in protecting their personal information. Executives determined that they can leverage this reputation for security in the software market.
All of this culminated in 2019 with the acquisition of Cylance, which uses artificial intelligence to thwart attacks before they occur. That year, 100% of revenue came from software and licensing activities. It also marked the first year of revenue growth in nearly a decade.
This turnaround story is real, but it’s still early. Now is the time to capitalize.
Will BlackBerry stock spike?
BlackBerry’s pivot to a cybersecurity company is now complete. There are signs that it’s on a track for success.
Its QNX platform, which secures vehicles from hacking, is already installed in more than 160 million cars worldwide. The platform is so unique that Amazon recently partnered to contribute to the technology rather than create its own. As our cars become fully self-driving, this software will become critical. It’s a long-term play, but BlackBerry has an early edge.
The company also has an early lead in the internet-of-things domain. Every device we connect to the internet is vulnerable to attack. These vulnerable endpoints grow by the thousands on a daily basis. BlackBerry has a software suite already deployed that protects these endpoints using its Cylance artificial intelligence platform.
It’s still early, but growth is starting to heat up. Here’s the good news: the market hasn’t noticed yet. BB stock trades at a 50% to 90% discount to its industry peers. Once growth starts to hit, expect that big discount to narrow very quickly.
