Right now, BlackBerry has multiple bets on rapid-growth markets that could turn a $1,000 investment into $10,000 or more. Few investors are paying attention, but this could prove the best investment of 2021.
Get in early
Why should you take a bet on a company that will grow in 2021? Why not stick with 2020 winners?
BlackBerry is a tech stock focused on one of the most lucrative segments: cybersecurity software. This market is growing like a weed, and valuations are commensurately high.
For example, CrowdStrike trades at 44 times sales. That’s a hefty price tag, until you realize sales have doubled every year since 2017. The cybersecurity software market is a gold mine if you can figure out how to tap it.
As a new industry player, BlackBerry’s valuation is deeply discounted. Shares trade at just 2.7 times sales. That’s 90% lower than peers like CrowdStrike.
The rewards for getting in early are clear, as you benefit from two tailwinds.
First, you win when the valuation multiple trends towards the industry average. BlackBerry may never reach the levels of CrowdStrike, but it would be very reasonable to expect shares to trade at 10 times sales. That’s where much of the industry trades, and still represents 200% upside through multiple reversion alone.
Second, you’re able to buy these high-growth rates at low-growth prices. As the company ramps up its cybersecurity businesses, growth should consistently be in the double digits. Sales growth will only compound the multiple reversion returns.
BlackBerry stock is ready
The market hasn’t figured it out yet, but BlackBerry just finished a multi-year turnaround that will transform the business from a money loser into a true growth stock. This isn’t a transition waiting to happen; it’s already done.
The company’s portfolio of cybersecurity tech already leads the industry in some areas. Its Cylance division uses artificial intelligence to protect endpoints from attack before the attacks even occur. That’s useful in high-risk applications with catastrophic costs of failure, like self-driving cars.
Speaking of autonomous vehicles, BlackBerry’s QNX cybersecurity platform is already installed in more than 160 million cars worldwide. Nine out of 10 global manufacturers use the platform. As our cars get more connected, BlackBerry is in the lead to provide the cybersecurity component. It could become the Microsoft Windows for cars.
The market doesn’t trust that the company has turned a corner. That keeps the valuation multiple extremely depressed. Once there are signs of growth, expect that valuation gap to narrow quickly.
We may have just reached that milestone. Last week, the company shocked analysts by posting positive organic growth rates. The market was expecting a decline in revenue. John Chen, the company’s CEO, stressed that this is a turning point for BlackBerry. The stock popped 10% on the news.
Everything is lining up for BlackBerry stock to have a promising year in 2021. Through multiple reversion or underlying organic growth, there are several ways to win.
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.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Tom Gardner owns shares of CrowdStrike Holdings, Inc. The Motley Fool owns shares of and recommends CrowdStrike Holdings, Inc. and Microsoft. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. Fool contributor Ryan Vanzo has no position in any stocks mentioned.