It appears BlackBerry (TSX:BB)(NYSE:BB) has made it to the big leagues — at least, as far as the company’s suite of software products is concerned.
I think the company’s partnership with Amazon.com (NADAQ:AMZN) is a transformational one for this company. Additionally, I think the growth thesis behind BlackBerry could propel this stock to new highs in the future.
Despite a rapid sell-off of late, investors may be enticed to sit on the sidelines to wait for the volatility to subside. Indeed, speculation that the Reddit-fueled momentum behind this stock is gone has spooked some momentum investors. That said, I think BlackBerry was a target of many growth investors prior to the “WallStreetBets” phenomenon of recent weeks. Whether this stock is loved by the WSB crowd is irrelevant, in my view, to long-term growth investors who like the story with this company today.
This is a marathon, not a sprint
At the end of March, BlackBerry is expected to report earnings. This is a relatively decent amount of time for BlackBerry to get to work and show improved results. The extent to which the Amazon-BlackBerry deal will pay off right away remains uncertain. However, I think investors should focus on the long-term impacts this deal could have.
This is a transformational deal I think has the potential to continue to provide a growth thesis underpinning a consistently higher valuation multiple. BlackBerry has continued to trade closer to a hardware provider than a software company in recent years. I think this dynamic could change.
Valuation isn’t unreasonable right now
In a recent article, fellow Fool contributor Joey Frenette aptly commented on BlackBerry’s current valuation. He wrote: “After the latest +50% plunge, BB stock trades at 7.7x sales. That’s not a high price to pay for a firm that’s heavily involved in the cybersecurity scene.” I have to agree. Compared to other high-flying software stocks right now, BlackBerry looks cheap.
He continued: “While I’ve often referred to BlackBerry as a difficult turnaround stock to evaluate, given all the moving parts and acquisitions that have been made over the years. This difficulty in valuing the stock, I believe, was a top reason why I thought BB stock was a gem that was hiding in plain sight.”
BlackBerry could indeed continue its rise, if investors believe in the growth story this company is telling. Right now, this is a difficult stock to value. I think investors will have a clearer line of sight into what the future growth and earnings potential of BlackBerry looks like in the coming quarters.
