After acquiring security company Cylance earlier this month and with its share price now dropping even lower, should BlackBerry (BlackBerry Stock Quote, Chart: TSX, NYSE:BB) be considered a buy at these prices?
The jury is still out on both the Cylance deal and the fate of the stock, says Matt Kacur, president of FSA Financial Science and Art, who says he needs to see more numbers on the acquisition before making the call.
Canadian tech company BlackBerry made headlines recently with its US$1.4-billion purchase of Irvine, California-based cybersecurity firm Cylance, a deal which according to CEO John Chen is not only a perfect fit for BB but launches his company into the upper echelon of software and security companies worldwide.
“We intend to be the number one player in the world. If you look at it, we are now one of the biggest players with a billion dollars in software and services and the majority of that in cybersecurity,” Chen says. “We have aspirations for growth and this is the reason why we did this.”
So far, however, the market has reacted with something less than shrug, continuing BB on its downward trajectory where the stock now sits down 16 per cent year-to-date. A bargain at these prices or is there more downside to follow? Hard to tell, says Kacur.
“It’s a good question. I really can’t endorse it right now,” says Kacur in conversation with BNN Bloomberg. “I looked at the acquisition and there’s very little information on it. It looks like a really good company, looks very interesting and it does make strategic sense. I just didn’t see a lot of financial disclosure.”
“I don’t even know how much [BlackBerry] paid for it — was it 5x EBITDA? There was just nothing in the literature that I could find, so I’m not yet convinced that it’s a game-changer,” he says. “I’ll have to see what happens.”
Cylance, a privately-held company which reportedly had intentions to go public in the near future, is said to have 900 employees and have generated US$130 million in revenue over its fiscal 2018 which ended in April. Chen has stated that Cylance’s growth rate is “in the high double-digits.”