Since the beginning of November, BlackBerry (TSX:BB)(NYSE:BB) stock is up close to 82%. The encouraging announcements on the vaccine against COVID-19 and BlackBerry’s multi-year agreement with Amazon Web Services for the Intelligent Vehicle Data Platform (IVY) have led to a rise in its stock price. Amid the recent surge, the company has returned over 30% for this year, easily outperforming the broader equity markets.
The Amazon Web Services partnership
Last week, BlackBerry and Amazon Web Services announced to have joined hands to develop an IVY cloud-connected software platform, which will allow automakers to read vehicle sensor data securely and create actionable insights.
With modern vehicles consisting of a unique set of proprietary hardware and software components developed from different suppliers, the data produced from each vehicle sensor would be unique and specialized, creating challenges for developers to bring innovative solutions quickly to the market.
However, BlackBerry’s IVY platform hopes to solve these issues by applying machine learning to data points to generate predictive insights and inferences, which would help developers to offer highly personalized in-vehicle experiences. The platform will be built upon BlackBerry QNX’s capabilities while utilizing AWS’s Internet of Things and machine-learning capabilities. So, the collaboration has created a multi-year growth prospect for BlackBerry, boosting investors’ sentiments.
Other growth prospects
BlackBerry had combined its Unified Endpoint Management (UEM) and Unified Endpoint Security (UES) to launch its Spark Suite platform in the May ending quarter. Since its launch, the platform is in great demand and has helped the company acquire many blue-chip clients.
The company had also launched its Guard platform, sensing the strong demand for Managed Detection and Response (MDR) solution. Frost & Sullivan projects the MDR segment to reach US$2 billion by 2024. So, the company has an excellent opportunity to expand its business in the segment. Further, the company has been developing innovative products to expand its customer base.
Meanwhile, the company’s BTS (BlackBerry Technology Solutions) segment, which was severely hit by the disruption in the automotive sector amid the pandemic-infused shutdown, had begun to show some improvement in the second quarter. With life and businesses inching closer to pre-pandemic ways amid the vaccine hope, I expect the automobile demand could rise to benefit BlackBerry.
In the previous quarter, BlackBerry had outperformed both analysts’ top-line and bottom-line expectations. It had reported revenue of $259 million, representing both year-over-year and sequential growth. Meanwhile, the company will report its third-quarter earnings after the market closes on December 17. I expect the company’s top-line growth to continue, given the recovery in its BTS business and its product portfolio expansion.
At the end of the second quarter, BlackBerry had $977 million of cash, cash equivalents, and investments. So, the company’s liquidity position also looks healthy.
Amid the recent surge, BlackBerry is trading at a forward enterprise value-to-sales multiple of 4.6, which looks relatively cheap compared to its peers. With its BTS business recovering and the growth prospects from its recent partnership with Amazon Web Services and its expanding product portfolio, I believe the company’s upward trend will continue. So, investors with three years of the horizon could buy the stock for superior returns.
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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.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.