BlackBerry (TSX:BB) is showcasing strength in 2023, as investors continue to add fundamentally strong growth stocks to their portfolios after last year’s sharp correction. BB stock currently trades at $5.23 per share with about 18.6% year-to-date gains. By comparison, the TSX Composite Index has risen 4.1% this year so far. Before I highlight some key factors that make BlackBerry stock a great buy for the long term, let’s find out what led to a sharp correction in its share prices last year.
BB stock lost nearly 62.7% of its value in 2022. However, BlackBerry was not the only stock that witnessed a massive selloff last year, as most of its peers also tanked. For example, Canadian tech stocks Shopify, Dye & Durham, and Lightspeed dived by 73%, 63.4%, and 62.1%, respectively, in 2022.
This massive correction in the share prices of tech companies started after investors started fleeing risk amid rising macroeconomic uncertainties. Factors like high inflationary pressures, rising interest rates, and growing geopolitical tensions increased the possibility of a looming recession, raising concerns about tech companies’ feature growth prospects. This was one of the key reasons why most tech stocks, including BlackBerry stock, plunged sharply last year.
Notably, the Waterloo-based tech company makes most of its revenue from the cybersecurity segment. In the first three quarters of its fiscal year 2023 (the fiscal year will end in February 2023), its cybersecurity sales fell 7% YoY (year over year) to US$330 million. Besides macroeconomic worries, the recent weakness in BlackBerry’s cybersecurity segment revenue seemingly hurt investors’ sentiments and increased the pressure on BB stock.
What makes BB stock worth considering today?
The recent softness in BlackBerry’s enterprise cybersecurity software segment could mainly be attributed to macroeconomic concerns, which are forcing businesses across the globe to cut their costs. Nonetheless, the growth in its IoT (Internet of Things) segment still remains impressive. In the first three quarters of its fiscal year 2023, BlackBerry’s IoT segment revenue jumped 21% on YoY basis to US$153 million.
Clearly, the contribution of its IoT segment to BlackBerry’s total revenue is currently significantly less than the contribution of its cybersecurity segment. But I expect the IoT segment to be a major financial growth driver for the Canadian tech firm in the coming years with the help of its growing efforts to develop advanced technological solutions for futuristic mobility.
For example, BlackBerry has high hopes from its upcoming intelligent vehicle data platform, IVY, which it expects to be generally available in May 2023. The IVY platform will allow automakers to access in-vehicle sensor data in real-time to provide advanced functions and features to their consumers. Such artificial intelligence and machine learning-based data platforms will play a key role in futuristic self-driving vehicles. This is one of the key reasons why I expect the demand for its IVY platform to remain solid in the coming years, which should help BlackBerry’s financial growth to improve significantly.
Given its solid long-term growth prospects, I find BB stock highly undervalued right now, especially after it has lost nearly 35% of its value in the last year.