Even as the broader market continues to experience a roller coaster ride this year, BlackBerry (TSX: BB) stock is holding its gains relatively well. Despite losing nearly 8% of its value this month, the TSX-listed BB stock currently trades with solid 57% year-to-date gains as of September 22 at $6.93 per share. By comparison, the Toronto Stock Exchange’s main index is up only 2% in 2023.
Does BlackBerry stock look attractive to buy now after its recent correction? Before discussing that, let’s look at the ongoing growth trends in BlackBerry’s fundamental outlook and recent financials.
BlackBerry’s solid fundamental outlook
It’s important to note that BlackBerry currently makes most of its revenue from its cybersecurity segment. In its fiscal year 2023 (ended in February), the company generated nearly 64% of its total revenue from the cybersecurity segment. However, the contribution of its IoT (Internet of Things) segment to its total revenue is also growing fast. I expect the IoT segment to play a major role in BB’s financial growth in the long term due mainly to its increased focus on developing futuristic solutions for the automotive industry. Let me explain that with a couple of examples.
For example, the demand for its QNX platform is expected to strengthen in the coming years, as it helps automakers integrate advanced driver assistance systems (ADAS) and autonomous driving features in their vehicles. Similarly, its artificial intelligence and machine learning-based intelligent vehicle data platform, BlackBerry IVY, has already started gaining popularity after receiving positive feedback from several large global automakers. The IVY platform allows carmakers to securely collect in-vehicle sensor data in real time and utilize it to provide advanced features and functionalities to their customers.
The addition of such advanced technological offerings in its portfolio is the main reason why I expect BlackBerry’s financial growth trends to exponentially improve in the years to come.
The recent weakness in its cybersecurity segment
A large number of public and private organizations across the globe use BlackBerry’s cybersecurity solutions. While its position in the enterprise cybersecurity domain is very strong, the slowing global economy has forced most organizations to cut their expenditure on cybersecurity tools lately. This is one of the key reasons why the sales of the company’s cybersecurity segment declined by 18% year over year in the May 2023 quarter to US$93 million. Nonetheless, its May sales figure still reflected a sequential improvement over its cybersecurity segment revenue of US$88 million in the February 2023 quarter.
Although macroeconomic concerns, inflationary pressures, and rapidly rising interest rates might continue to affect the cybersecurity industry in the near term, BlackBerry’s innovative offerings in the domain and its large customer base still make its cybersecurity segment’s long-term growth outlook very strong.
Bottom line
Despite all the short-term challenges I’ve highlighted above, BB could be a great Canadian tech stock to invest in right now. This is because it hasn’t seen much appreciation in recent years for its growing presence in the IoT segment. While BlackBerry stock has already risen roughly 57% in 2023 so far, it still trades well below its pre-pandemic year 2019’s closing level of $8.35 per share, making it look cheap to buy for the long term.
Note that BB stock might remain volatile in the next few sessions, as it’s expected to announce its latest quarterly results on September 28.
