Stocks are as good as their company, products, management, and employees. Some companies are good in quality, some in sales volume. Some are niche and highly profitable, while others are broad-focused with marginal profits. A few companies grow aggressively, and a few steadily. Each company has its way of doing business, and if that aligns with your goals, then that is the stock to buy. While fundamentals play a role, investors’ belief in a company’s future earnings potential drives the stock price. BlackBerry (TSX:BB) could be a stock to buy right now if you believe the company can finally unlock value and make its decade-long turnaround a reality.
Why BlackBerry is a top stock to buy right now?
BlackBerry stock is trading closer to its 20-year low as the tech company is undergoing a massive restructuring to unlock value for shareholders. After serving two terms, the board has replaced CEO John Chen with John Giamatteo. The new CEO is separating cybersecurity and Internet of Things (IoT) as standalone businesses under the Blackberry umbrella. This separation could give more authority to the respective business heads and speed up the decision-making process.
BlackBerry is operating in high-growth markets of cybersecurity and IoT. As we move towards an interconnected world of robotics, digitization, and AI at the edge, the blend of endpoint management and IoT will be the need of the hour. BlackBerry’s cybersecurity products are preferred by governments of 17 G20 nations. Its IoT software is adopted by 24 of the top 25 electric vehicle makers.
These figures show that BlackBerry products are high quality and preferred by the top brass. The problem lies in execution. Also, several macro-level headwinds since the pandemic have prevented the stock’s recovery.
The semiconductor shortage, automotive demand pullback due to high-interest rates, and the delay in cybersecurity contract renewal due to business uncertainty saw BlackBerry’s revenue slide in the last two years. As a result, the stock dipped to its 20-year low.
While the macro situation is beyond the company’s control, what is in its control is improving operating efficiency. The management is revising the business structure to improve product implementation and cut costs. It is reducing its facility count and laying off 200 jobs to save $55 million annually and improve net profit by $100 million. The company is focused on profitability and aims to report positive cash flow by March 2025.
BlackBerry stock is a buy if you believe in IoT proliferation
The way things work in the tech sector, you have to wait for the wave of wider adoption. In 2023, the generative artificial intelligence (AI) wave swept all AI stocks to new highs. In 2021, the crypto wave swept blockchain stocks, and the e-commerce wave in 2020 made Shopify the most valued stock on the TSX. These stocks paid off for the long wait in a matter of months and made investors rich.
BlackBerry’s IoT business offers QNX real-time operating systems (OS) for connected devices in the automotive, medical, industrial automation, and other markets. BlackBerry Radar offers telematics and asset monitoring solutions. IVY vehicle data platform collects data from the vehicle’s sensors to generate predictive insights and inferences. These software systems combined with Blackberry’s endpoint security solutions can play a pivotal role in autonomous vehicles and AI at the edge.
The IoT proliferation has been underway since 2015, but capturing the value has been challenging due to technology infrastructure and ecosystem bottlenecks. However, the 5G rollout and advancements in AI and cloud have set the stage for embedded devices to deliver value. It may take a few more years, but BlackBerry would be a clear winner in the IoT wave.
Investing strategy for this tech stock
You have to think like a hedge fund to make money in BlackBerry stock. Buy the dip and wait for the wave to grow your money severalfold. BlackBerry has been among the largest holdings of Fairfax Holdings for years because the value investor sees the potential.
