Why BlackBerry (TSX:BB) Stock Doubled This Month

In January, BlackBerry (TSX:BB)(NYSE:BB) stock went parabolic, defying all expectations.

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BlackBerry Inc (TSX:BB)(NYSE:BB) stock has gone parabolic this month, starting at $8.44 and reaching $18.86 as of this writing–a 111% gain! If you’d purchased BB stock at the start of the month and sold last Friday, you’d have doubled your money — an incredible result.

But all of this begs the question:

Why?

In the third quarter, BlackBerry’s GAAP revenue declined and its net loss got larger. Its third quarter press release stated that it enjoyed profits and revenue growth, but both statements were true only by non-GAAP standards. By conventional accounting standards, it was a losing quarter for BlackBerry.

Nevertheless, investors are bullish on BB stock. There must be reasons for this, and as it turns out, there are a few good ones. In this article I’ll explore them in detail.

Facebook lawsuit

One possible reason why BB stock rallied this month is because it settled a huge IP lawsuit with Facebook. BlackBerry accused BB of unlawfully using its messaging patents; Facebook countersued, but eventually settled. Nobody knows yet exactly how much BlackBerry will get from the settlement, but it could be a recurring annual amount that will boost the company’s cash flows.

Amazon deal

Another possible reason why BlackBerry rallied this month is because it scored a major deal with Amazon.com. BlackBerry has long been known for its car software, and in 2020, the company inked a deal with Amazon to collaborate on self-driving cars. This partnership will see BlackBerry leverage its Intelligent Vehicle Data Platform for use in AI car research by AWS.

Amazon is a massive player in the tech world, and this partnership could prove very lucrative. BlackBerry has already seen massive adoption of its car software, and a well-known deal with Amazon could take that success to a new level.

Product success

Viewed purely in terms of products, BlackBerry’s pivot to software has been an undeniable success story. BlackBerry’s QNX software is now running on 175 million cars and the company has signed big deals with companies like Canadian Pacific Railway. Industry titans already respect BlackBerry software, as evidenced by the Amazon deal. The only question remaining is how BB will turn this into profits.

Foolish takeaway

So far, BB stock has been one of the 2021’s breakout stories, attracting interest well beyond Canada. It’s become a favourite of Reddit’s r/wallstreetbets forum and is getting plenty of publicity in financial media.

While the company’s earnings don’t back up its stock price gains, it doesn’t mean they never will. BlackBerry has scored a huge legal victory, inked a deal with Amazon, and seen its software installed on 175 million cars. If all of that doesn’t result in some kind of profit in the future, it would be very surprising.

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. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Andrew Button owns shares of Facebook. David Gardner owns shares of Amazon and Facebook. Tom Gardner owns shares of Facebook. The Motley Fool owns shares of and recommends Amazon and Facebook. 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.

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