Investing in the stock market could be incredibly rewarding if you have a clear vision and follow emerging sectors with long-term growth potential. Buying fundamentally strong growth stocks at a bargain could also be one of the best ways to benefit from future market leaders, and BlackBerry (TSX:BB) is arguably a perfect example of such a stock. In the last decade, the company has pivoted from its smartphone roots to focus on enterprise software. However, BlackBerry is a top buy only if you believe in its transformation and potential dominance in its new focus areas.
In this article, I’ll dive into BlackBerry’s business model and growth prospects and highlight a key factor that could make it a winning investment in the long run.
BlackBerry’s cybersecurity division continues to grow
BlackBerry currently has a market cap of $2 billion as its TSX-listed stock trades at $3.37 per share with 28.3% year-to-date losses. This Waterloo-based software firm mainly focuses on cybersecurity and Internet of Things (IoT) solutions.
In the second quarter (ended in August) of its fiscal year 2025, BlackBerry’s total revenue rose by nearly 10% YoY (year over year) to US$145 million with the help of robust growth in both of its main business segments. The company’s cybersecurity division contributed US$87 million in sales, inching up by 10% from a year ago and exceeding its own guidance. In addition, the segment’s 55% gross margin reflected BlackBerry’s improving efficiency in this space.
Its Cylance suite, built on AI (artificial intelligence) driven cybersecurity solutions, is apparently playing an important role in the company’s success in managed detection and response. This AI-based approach sets BlackBerry apart from most other traditional cybersecurity software providers.
But this factor could immensely boost BlackBerry’s growth prospects
While the long-term growth outlook for BlackBerry’s cybersecurity segment looks impressive, consistently growing demand for its IoT solutions has the potential to supercharge its growth. BlackBerry’s QNX operating system is a core product in its IoT segment, and it’s currently used in more than 235 million vehicles across the globe. In the August 2024 quarter, BlackBerry’s IoT segment’s revenue stood at US$55 million, marking a 12% YoY growth, driven primarily by the expanding adoption of its QNX operating system.
In recent years, BlackBerry has also increased its efforts to develop technologically advanced platforms for the automotive industry, which could play a key role in the future of connected and autonomous cars. For example, its connected vehicle data platform, BlackBerry IVY, is one of the company’s most promising initiatives. The IVY platform is scalable and cloud-based. It could deliver real-time data from vehicle sensors and allow automakers to enhance in-vehicle experience.
As the automotive industry continues to shift toward electric and autonomous vehicles, the demand for such secure, AI and machine learning-based solutions is likely to skyrocket in the years to come, which could significantly accelerate BlackBerry’s financial growth trends. So, if you believe in the increasing importance of IoT and AI-driven solutions in the automotive industry, BlackBerry stock could be worth investing in right now.
