BlackBerry (TSX:BB) stock’s last four-month momentum caught the attention of shareholders. The company has been struggling to make a turnaround from a hardware to a software company for the last five to seven years. Within the turnaround, the company is making a second turnaround of turning cash positive and it plans to achieve it by offloading assets.
BlackBerry stock’s rise and fall in the last four months
First BlackBerry shares surged 164% between November 20, 2024 and February 18, 2025 to $8.61 per share. This price was not sustainable as there was no fundamental backing to the rally. A 2025 earnings per share (EPS) outlook of $0.02 or breakeven does not justify a 65.79 times forward price-to-earnings (PE) ratio.
Hence, when the market corrected, BlackBerry stock fell as much as 29.7% between February 18 and March 10. This was when U.S. President Donald Trump announced tariffs on all Canadian imports, including automotive.
Such strong stock momentum is influenced by options traders. There was an increasing interest in short sales. However, short selling works when there is liquidity and optimism in the market. The Trump tariffs created macroeconomic uncertainty and at such times investors hold onto cash and sell risky investments.
Why is BlackBerry a risky stock?
BlackBerry shares began rallying in November 2024 after the company reported its first quarterly free cash flow in many years of $3 million in the third quarter of fiscal 2025, after burning $31 million a year ago. Even the slightest sign of optimism can create significant momentum in highly volatile stocks like BlackBerry.
A single quarter of positive cash flow cannot immediately overturn investors who have seen BlackBerry’s multi-year losses and revenue declines. The new restructuring has further reduced Blackberry’s business. It sold its cybersecurity business Cylance to Arctic Wolf. Behind the sale were the high investments the business required, which made it unprofitable.
Now BlackBerry has two businesses, the Internet of Things (IoT) business that offers QNX software and Secure Communications that offers Secusmart and Unified Endpoint Management (UEM). Both businesses generate 15–17% in operating margin. With loss-making businesses out of the picture, BlackBerry could report an operating profit in fiscal 2025.
Is that enough?
BlackBerry’s issue is not margins but sustainable revenue growth. Unless that is solved, the stock will continue to remain risky.
Why isn’t BlackBerry addressing the elephant in the room?
BlackBerry operates in two high-growth markets, IoT and secure communications. Yet it has been struggling to sustain revenue growth. Firstly, it operates in a highly competitive market. Secondly, it needs to diversify its QNX beyond automotive into other verticals. While it is making efforts in healthcare and industrial applications, the numbers are not making a dent in the overall earnings.
The need of the hour is an aggressive go-to-market strategy and rethinking of product offerings for private enterprises. Scaling the business and expanding the customer base beyond this niche is what can help BlackBerry sustain sector-specific headwinds.
I would be excited to see plans to increase market share and grow revenue. While it is showing some efforts in the IoT space, most of them are renewals and upgrades. Even now, the growth is hinging on realizing QNX’s royalty backlog of $815 million in the next five years. The backlog will be realized only when the products equipped with QNX are produced. There is a possibility that the product will be canceled and never go into production or the automotive company will go bankrupt, as was the case with Fisker.
The concentration on automotive makes the royalty backlog unappealing after a long wait of four years.
What should you do with Blackberry stock?
If you bought BlackBerry stock below $4, it is a good time to sell for a profit. If you are considering buying the stock to benefit from the turnaround, steer clear until the company can sustain revenue growth for a year.
There are many fundamentally strong tech stocks operating in the IoT space. Advanced Micro Devices, for instance, has a better chance to grow with its artificial intelligence (AI) data centre and AI at-the-edge solutions.
