BlackBerry Stock is Rallying! Buy Before It’s Too Late

BlackBerry’s improving fundamentals have helped its stock soar lately and outperform the broader market.

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Shares of BlackBerry (TSX:BB)(NYSE:BB) have recently started rallying despite the broader market’s sideways movement. In the last 25 sessions, BB stock has gone up by 22% to $8.72 per share — outperforming the TSX Composite Index by a wide margin, as it rose by only 2.3% during the same period. While ongoing economic uncertainties might mean stocks are volatile in the near term, I still consider BlackBerry to be one of the best Canadian stocks to buy right now and hold for the long term. Before I explain why, let’s quickly review BB stock price movement so far this year.

BlackBerry’s recent stock price movement

After rising by nearly 22% in 2021, BlackBerry stock started this year on a slightly positive note as it rose by 3.1% in the first quarter. However, a tech sector-wide crash amid investor concerns about rising interest rates and inflationary pressures reversed this positive trend. As a result, the stock slipped by about 13.8% in the second quarter.

Nonetheless, the company’s consistently better-than-expected quarterly results and improving fundamentals are keeping investor optimism intact. These could be the two main reasons why BB stock has risen by about 39% after reaching its lowest level in 18 months on May 12.

Improving financial growth

The Waterloo-based tech company has been beating Street analysts’ bottom line estimates for the last four quarters in a row. In the May 2022 quarter, BlackBerry’s cybersecurity segment revenue rose 6% YoY (year-over-year) to around US$113 million. More importantly, its revenue from the IoT (internet of things) segment surged by 19% YoY with the help of strengthening demand for its QNX software and other offerings for the auto industry. As a result, BlackBerry posted an adjusted net loss of US$31 million for the quarter — much narrower than the expectation of US$38.8 million.

Strong fundamentals

Apart from its improving financial growth trends, one thing I find even more appealing is BlackBerry’s increasing focus on developing advanced machine learning and artificial intelligence-based technological solutions for futuristic vehicles. In some of my recent articles, I’ve highlighted how the Canadian tech company has the potential to significantly expand its presence in the automotive technology space with the help of its QNX operating system and the upcoming intelligent vehicle data platform called IVY.

On this front, BlackBerry recently reached another milestone by announcing its partnership with NETA Auto — an electric vehicle brand owned by China’s Hozon New Energy Automobile. Under this partnership, the Chinese automaker will use BlackBerry’s QNX technology in its upcoming futuristic sports sedan, the NETA S, which is likely to enter production soon. I expect this move to further strengthen BlackBerry’s presence in the electric vehicle segment in China — the world’s largest automotive market. This recent announcement could be another reason why BlackBerry has regained investor confidence lately — triggering a sharp rally in its stock.

Foolish bottom line

While BlackBerry stock is down 26% on a year-to-date basis, and might continue to remain volatile in the near-term due to ongoing macro level uncertainties amid high inflation, I still find this stock very attractive for the long-term. Its growing presence in the automotive space could help its financials grow exponentially in the coming years, allowing BB stock to continue soaring.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

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