Which Stock Has Better Fundamental Upside: BlackBerry or Facedrive?

Are you worried about a tech bubble? Then you should look at internet stocks for their fundamental upside and not stock price upside. 

| More on:

In today’s world, billionaire investors like George Soros fear a tech stock bubble. If you recollect the internet bubble of 2000, people invested millions in internet stocks, which had no concrete business, just reality-distorting stories. While the dot.com bubble was plagued with defunct companies, not all internet companies were defunct. The trick is to differentiate between real businesses with growth potential and businesses with good investor promotion.

Internet-based businesses don’t require much capital, and they can stall the profit in the hopes of scalability and volume. Then how do you differentiate businesses with potential from businesses with promotion? The answer is fundamentals. I have a perfect comparison for you: BlackBerry (TSX:BB)(NYSE:BB) versus Facedrive (TSXV:FD). 

Facedrive stock

Facedrive is a stock that sells itself as a multi-faceted “people-and-planet first” tech ecosystem offering socially responsible services. Its primary business was that of ride sharing, but it lost track in 2020 and acquired many irrelevant businesses in an all-share deal.

Facedrive stock surged from $2.05 in September 2019 to $59.95 in February 2021, up almost 2,800%, and then collapsed 76% in two months. It reported 2020 annual revenue of $3.9 million, of which $3.4 million came from all-share acquisitions of

  • HiRide, a ride-sharing and car-pooling business;
  • Nearly bankrupt Canada’s food-delivery service Foodora; and  
  • Electric vehicle (EV) subscription service Steer.

Warren Buffett has a funny way of describing all-share deals like these: “I’ll pay you $10,000 for your dog by giving you two of my $5,000 cats.” 

In total, Facedrive operates in six verticals, each different from the other. Rideshare, Marketplace, Foods, Social, Health, and Steer. That makes me wonder what business is Facedrive into: tech platforms or holding companies. And if you look at its core business of ride sharing, it isn’t growing. It has a 3.5-star rating on Google Play, and the Facedrive team is not bothered to reply to any of the feedback. It looks like the app is abandoned, and the drivers are not showing up. 

This highly dysfunctional company is a perfect example of a short-term investor promotion only to raise funds. Such companies don’t have fundamental support and are first to collapse in a bubble burst. 

BlackBerry 

Operating in the same market are fundamentally viable cloud companies like BlackBerry. This company survived the 2000 dot.com bubble. BlackBerry stock dipped 76% between March and May 2000, but it survived the bubble. These bubbles clean up all dysfunctional companies from the market and only leave the one with strong fundamentals. 

If your foundation is strong, you can withstand the harsh weather. After three years of the dot.com bubble, BlackBerry rose to unprecedented levels on the back of its smartphone. But it faced the worst nightmare of any tech company: disruptive technology. Apple’s touch screen iPhone disrupted the market for BlackBerry’s button phones. BlackBerry is still recovering from this attack and has now prepared a strong foundation in the cybersecurity and automotive operative system (OS) space. 

Its cybersecurity solutions serve enterprises in highly regulated verticals like the government, financial services, and healthcare. Its automotive OS is used in 175 million cars. It has the right tech in the right business. Now, all it needs is to overtake the competition and gain market share. Sadly, that is the toughest part in the highly competitive cybersecurity space. 

BlackBerry stock is in a downcycle — down 33.6% in the last two months. The challenges will continue for the next two years until the pandemic eases and the EV demand returns. BlackBerry’s revenue fell 16%, but its adjusted EBITDA surged 12% in fiscal 2021, indicating that the company’s fundamentals are strong enough to help it withstand another decline. 

Investing in fundamental stocks

A stock that has withstood multiple crises deserves a round of applause for its foundation. A stock like BlackBerry needs patience. The world won’t change for it in a day. But it has the potential to fall, get back up, and fight. Such are the stocks you buy at the dip and forget. In the next three to five years, the stock might not show much growth. But when it enters the growth momentum, it could show unprecedented growth, as it did in the 2003-2007 period, rising 1,800%. 

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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Puja Tayal has no position in any of the stocks mentioned. David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), and Apple. Tom Gardner owns shares of Alphabet (A shares) and Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: short March 2023 $130 calls on Apple and long March 2023 $120 calls on Apple.

More on Tech Stocks

Person uses a tablet in a blurred warehouse as background
Tech Stocks

2 Canadian AI Stocks Poised for Significant Gains

Here are two top AI stocks long-term investors may want to consider before the end of the year.

Read more »

woman looks at iPhone
Dividend Stocks

Retirees: Is TELUS Stock a Risky Buy?

TELUS stock has long been a strong dividend provider, but what should investors consider now after recent earnings?

Read more »

Car, EV, electric vehicle
Tech Stocks

Better Electric Vehicle (EV) Stock: Magna International vs. Rivian

Rivian (NASDAQ:RIVN) is growing quickly, but Magna International (TSX:MG) is more profitable.

Read more »

Canadian Dollars bills
Tech Stocks

Invest $30,000 in 2 TSX Stocks, Create $9,265.20 in Passive Income

If you're only going to invest in two TSX stocks, invest in these top choices that have billionaires backing them…

Read more »

Start line on the highway
Tech Stocks

3 Beginner-Friendly Stocks Perfect for Canadians Starting Out Now

Are you new to investing in the stock market? Here are three Canadian companies that are perfect to get you…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

Step Aside, BlackBerry: This AI Stock Is the Real Deal for Canadian Investors

Down 60% since 2016, BlackBerry stock remains a high-risk investment for investors due to its tepid sales and negative profit…

Read more »

cryptocurrency, crypto, blockchain
Tech Stocks

2 Stocks to Hold Instead of Bitcoin in 2025

Investors with a high-risk appetite can consider increasing exposure to stocks such as MicroStrategy and Coinbase to benefit from the…

Read more »

Asset Management
Dividend Stocks

3 Safe Canadian Stocks to Buy Now and Hold During Market Volatility

These Canadian stocks offer the perfect trio for investors looking for growth, income, and long-term holds.

Read more »