Is it Too Late to Buy BlackBerry Stock?

Trading near $4 per share again, there might be more upside to BlackBerry (TSX:BB) stock that investors can capture by investing right now.

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The S&P/TSX Composite Index, Canada’s primary benchmark index, surged by 2.65% within the first week of trading in May, fueled by the hope of an interest rate cut to be announced in June. Share prices of several stocks spiked in light of the development. As of this writing, BlackBerry (TSX:BB) trades for $3.95 per share, up by 17.9% from its 52-week low.

What was once a major player in the early smartphone industry, BlackBerry is now primarily providing intelligent security software and services to enterprises and governments. The $2.33 billion market capitalization forms leverages machine learning and artificial intelligence to deliver tech-based solutions for cybersecurity, data privacy, safety, and several other areas.

The company has been out of the limelight for decades. After several years of failing to report profits and declining revenue, the introduction of a new chief executive officer (CEO) might change the fortunes of the company. Today, I will discuss what is happening to help you determine whether it might be a good time to add it to the holdings in your self-directed investment portfolio.

The long-term prospects for BlackBerry stock

The company is going through a restructuring that will see it operate two independent businesses within in-demand segments: endpoint security and the Internet of Things (IoT). The total addressable market for IoT and endpoint security is expected to hit US$52 billion by 2026.

BlackBerry’s IoT segment is very interesting. The business offers QNX Software, a platform that assists in asset tracking and operating systems. It also boasts IVY vehicle communication. Generating revenue based on royalties, the backlog for QNX royalties has increased from US$640 million in fiscal 2023 to US$815 million in fiscal 2024.

The overall weakness in the economy led to a significant drop in demand in the automotive industry. However, there is a recovery for demand on the horizon. A growth in automotive demand gives BlackBerry the opportunity to leverage the backlog. While it will take time to report positive earnings per share, the tech stock expects its revenue from the IoT segment to grow by 9.3% in fiscal 2025.

Besides the automotive market backlog, the IoT segment will also grow due to the rise of the 5G ecosystem. QNX software will play a big role in the 5G ecosystem rollout, and several companies are already partnering with BlackBerry to address software demand.

Near-term troubles for BlackBerry stock

The IoT growth cycle might be underway, but the company’s cybersecurity segment still faces stiff competition. Due to various economic and geopolitical factors, the business landscape also faces plenty of uncertainty, creating problems for the company in securing major cybersecurity contracts. BlackBerry anticipates a 3.4% drop in its revenue from the cybersecurity segment in fiscal 2025.

Despite the short-term problems right now, BlackBerry’s cybersecurity segment should see an improvement in revenue in the long run. The rise of 5G will increase the demand for endpoint security to create a safer 5G environment, leading to significant long-term growth.

Foolish takeaway

After the slight pullback from trading above $4 per share, there might be more pullbacks in the near term for BlackBerry stock. The company’s tech is scalable, and there is plenty of potential for demand to grow drastically in the coming years.

Despite the possibility of further pullbacks in the near term, BlackBerry might be an excellent buy to capture long-term gains. The new CEO aims to get the company to report positive cash flow by March 2025. If BlackBerry hits that profitability, its share prices can soar.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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