BlackBerry (TSX:BB) has been among the worst-affected Canadian tech stocks by the latest round of stock market selloffs. After rallying by 66% in the first half of 2023, BB stock has slipped by 36% since then to currently trade at $4.73 per share with a $2.8 billion market cap. By comparison, the TSX Composite benchmark has seen 3.4% value erosion so far in the year’s second half.
However, the recent big losses in BlackBerry’s share prices make it look really undervalued to buy for the long term, in my opinion, especially for investors who want to benefit from the upcoming AI (artificial intelligence) boom. Let me explain why.
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BlackBerry’s transition from smartphones to innovative software solutions
When many people hear about BlackBerry, they still associate the company with its secure messaging services and the brand BlackBerry, which used to make bulky smartphones well over a decade ago. Not many people know that over the years, BB has transitioned from a hardware-centric business model to a focus on software and services, leveraging its reputation for security and privacy.
While BlackBerry may not be dominating the smartphone market today, its expertise in innovative enterprise cybersecurity and other IoT (Internet of Things) areas has positioned it as a leader in the ever-evolving tech industry. Based on its fiscal year 2023 (ended in February) financial figures, BlackBerry generated nearly 64% of its total revenue from its cybersecurity software segment, while a major portion of its remaining revenue came from its IoT business segment.
Geographically, the company’s business is also well diversified. Despite generating more than half of its total revenue from North America in the last fiscal year, BB made a healthy portion of its sales from other regions, including Europe, the Middle East, and Asia.
BlackBerry’s growing focus on AI
The launch of the Microsoft-backed OpenAI’s ChatGPT next-generation tool less than a year ago has played a big role in fast popularizing AI technology globally. Nonetheless, we shouldn’t forget the fact that BlackBerry has been working on innovative AI and machine learning-equipped software solutions for quite long, which became a part of its offerings years before the launch of popular AI-powered tools, including ChatGPT.
To give you a quick example, after it acquired the American software firm Cylance in 2019, BlackBerry has made notable progress in the field of AI-based predictive cybersecurity. Earlier this year, the company released a major update for the Cylance AI engine to enhance its predictive cyber defence capabilities for endpoint security.
On the IoT side, the Waterloo-headquartered tech firm started developing a machine learning and AI-driven, intelligent vehicle data platform called BlackBerry IVY in collaboration with AWS (Amazon Web Services) in December 2020. BlackBerry announced the general availability of the IVY platform starting in mid-2023, and the cloud-based platform is now already a part of multiple commercially available automotive platforms.
As the demand for innovative AI-based software solutions is expected to skyrocket in the next decade, the financial performance of BlackBerry’s cybersecurity and IoT segments is likely to significantly improve.
Interestingly, BlackBerry recently announced its intentions to separate its cybersecurity and IoT business units into two independent companies. In my opinion, the separation could give both business units a clearer vision, more agility, and the ability to drive deeper expertise in their respective fields, making the BB stock even more attractive to buy on the dip now and hold for the long term.
