Last week, BlackBerry (TSX:BB) provided preliminary numbers for its fourth quarter and fiscal 2023, which ended on February 28. The company’s management expects its topline to come in lower than its previously provided guidance. The weaker-than-expected preliminary number appears to have made investors nervous, leading to a 9.2% decline in its stock value since reporting its fiscal 2023 performance.
Despite the recent pullback, BB stock still trades 12.2% higher this year. So, let’s assess the buy opportunities in BlackBerry amid the recent correction.
BlackBerry’s fiscal 2023 performance
For fiscal 2023, BlackBerry has estimated its revenue to be US$656 million, representing an 8.8% decline from its previous year. The decline in revenue from cybersecurity and licensing segments could weigh on the company’s financials.
Management has blamed the slipping of specific large government orders to the next fiscal amid continued negotiations for the decline in cybersecurity sales. Year over year, revenue from the cybersecurity segment could decline by 12.4% to US$418 billion. However, the company’s management expects its IoT (internet of things) segment to deliver a solid performance. They forecast revenue to grow by 15.7% to US$206 million, offsetting some of the declines.
Amid the recent development, management has announced that it is reviewing its long-term targets for the cybersecurity segment and will provide them later. Now, let’s look at its growth prospects.
BlackBerry’s growth prospects
Although BlackBerry posted timid fiscal 2023 preliminary numbers, its long-term growth prospects look healthy, with the IoT market projected to grow at a higher rate in the coming years. Maximize Market Research projects IoT in the automotive market to grow at a CAGR (compounded annual growth rate) of 26.7% through 2029, thus expanding the total addressable market for BlackBerry.
Meanwhile, the company is expanding its footprint in the IoT space by gaining market share in safety-critical automotive systems, ADAS (advanced driver assistance systems) and digital cockpit domains. Further, the company has announced that its IVY platform, which standardizes data produced from different systems across different vehicles, was pre-integrated into three commercially available digital cockpit platforms. Besides, the company has announced the platform will be available from May 2023, thus allowing for the rapid development of third-party applications.
Although BlackBerry is losing its market share in cybersecurity, the company has undertaken several rebuilding initiatives. These could yield results in the coming quarters. Noteworthy, the company has a solid customer base of blue-chip clients. Its expanded product offerings and cross-selling opportunities could boost its financials in the coming years. So, I believe the company’s long-term growth prospects look healthy.
After reaching a high of $6.36 in February, BlackBerry has corrected over 22%. Amid the sell-off, its valuation has declined to attractive levels, with its NTM (next 12 months) price-to-sales and price-to-book multiples standing at 3.2 and 1.6, respectively.
Meanwhile, many economists are projecting the Federal Reserve to continue with tougher monetary tightening initiatives given the strong labour market and resilient economy. So, I expect the company to be under pressure in the near term. However, given its long-term growth prospects and attractive valuation, I expect the company to deliver superior returns in the long run. So, investors with a longer investment horizon can start accumulating the stock.