1 Artificial Intelligence (AI) Stock I Wouldn’t Touch With a 10-Foot Pole

Some Canadian AI stocks, except for one in survival mode, are well-positioned to break out and deliver hefty gains in 2024.

| More on:

Market analysts expect 2024 to be the year artificial intelligence (AI) revolutionizes and transforms various industries. Tech stocks with data platforms supporting analytics and generative AI could benefit from this trend and break out this year.

Canada has several AI stocks that could soon be as prominent as their U.S. counterparts. The government’s commitment to support and foster AI innovation will help companies like Constellation Software, Open Text, and Kinaxis gain recognition and attract growth investors.

BlackBerry (TSX:BB) had an early advantage when it acquired AI-based cybersecurity firm, Cylance, in early 2019 for US$1.4 billion. Unfortunately, it didn’t boost the tech stock. At $4.35 per share, the overall return in 5 years is -55.02%. AI-related tailwinds are strong but steer clear of BlackBerry.

The mighty fall

BlackBerry flew high as the pioneer in hand-held devices or smartphones. Believe it or not, the share price rose to as high as $149.90 in mid-2008. However, it crashed with the arrival of Androids and iPhones. The mobile business lost to competition, causing BlackBerry to lose half its market value.

Management gave up the smartphone business and transitioned to a cybersecurity enterprise software and services company in 2016. John Chen joined BlackBerry as CEO and reinvented BlackBerry as a cybersecurity software and services firm.

Part of his task was to restore the company’s financial health and introduce strategies for long-term growth. Chen stepped down as CEO and retired effective November 4, 2023.

Financial performance

BlackBerry was in the red in two of the last three fiscal years. The $2.6 billion company reported US$12 million net income in fiscal 2022 and losses of US$734 million and US$1.1 billion in fiscal 2023 and fiscal 2021, respectively. Notably, revenue was trending downwards from 2021 to 2023.

In the first three quarters of fiscal 2024 (nine months ending November 30, 2023), revenue increased 34.7% year over year to US$680 million. The net loss was US$79 million compared to -US$239 million in the same period in fiscal 2023. John Giamatteo, President of BlackBerry’s cybersecurity division, was appointed CEO to replace Chen.

Giamatteo said Q3 fiscal 2024 was a strong quarter for the Cybersecurity business. BlackBerry secured large strategic deals with leading government agencies, leading to strong sequential revenue growth and margin expansion. The company will provide a full suite of cybersecurity solutions to the Government of Malaysia and was awarded a new contract by the U.S. Department of Homeland Security.

He adds that establishing the Internet-of-Things (IoT) and Cybersecurity as standalone divisions is ongoing. The board believes this move will unlock shareholder value and facilitate flexible decision-making. 

Losing proposition

Chen left BlackBerry without accomplishing the assigned tasks, mainly restoring financial health. Also, it’s uncertain if the strategic decision to fully separate the cybersecurity and IoT businesses will translate to business growth, profitability, and positive cash flow.

Survival is again the issue with BlackBerry in the wake of challenging macro and competitive headwinds. Besides poor fundamentals, management’s lower sales forecast is a deal buster. Some Canadian AI stocks could deliver hefty gains in 2024, but not BlackBerry.

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.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Software and Kinaxis. The Motley Fool has a disclosure policy.

More on Tech Stocks

Person uses a tablet in a blurred warehouse as background
Tech Stocks

2 Canadian AI Stocks Poised for Significant Gains

Here are two top AI stocks long-term investors may want to consider before the end of the year.

Read more »

woman looks at iPhone
Dividend Stocks

Retirees: Is TELUS Stock a Risky Buy?

TELUS stock has long been a strong dividend provider, but what should investors consider now after recent earnings?

Read more »

Car, EV, electric vehicle
Tech Stocks

Better Electric Vehicle (EV) Stock: Magna International vs. Rivian

Rivian (NASDAQ:RIVN) is growing quickly, but Magna International (TSX:MG) is more profitable.

Read more »

Canadian Dollars bills
Tech Stocks

Invest $30,000 in 2 TSX Stocks, Create $9,265.20 in Passive Income

If you're only going to invest in two TSX stocks, invest in these top choices that have billionaires backing them…

Read more »

Start line on the highway
Tech Stocks

3 Beginner-Friendly Stocks Perfect for Canadians Starting Out Now

Are you new to investing in the stock market? Here are three Canadian companies that are perfect to get you…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

Step Aside, BlackBerry: This AI Stock Is the Real Deal for Canadian Investors

Down 60% since 2016, BlackBerry stock remains a high-risk investment for investors due to its tepid sales and negative profit…

Read more »

cryptocurrency, crypto, blockchain
Tech Stocks

2 Stocks to Hold Instead of Bitcoin in 2025

Investors with a high-risk appetite can consider increasing exposure to stocks such as MicroStrategy and Coinbase to benefit from the…

Read more »

Asset Management
Dividend Stocks

3 Safe Canadian Stocks to Buy Now and Hold During Market Volatility

These Canadian stocks offer the perfect trio for investors looking for growth, income, and long-term holds.

Read more »