Owning BlackBerry stock is a big gamble, this analyst says

Then came the reality of 2018 during which BB lost more than half of its value. But while things look more promising so far in 2019, there are still a lot of unknowns surrounding Canada’s erstwhile phone maker, making it a tricky pick for investors, says Peter Hodson of 5i Research, who argues that there are safer tech bets out there.

“I think it’s still a work in progress,” says Hodson, founder and head of research at 5i Research, to BNN Bloomberg Wednesday. “I think it’s a three to five-year window of time before you can give it a scorecard on whether this move has been the right one or not. But so far so good.”

“It’s a decent little company but it wouldn’t be our favourite tech stock because we would rather have a company that doesn’t have to reinvent themselves,” he says. “We’d rather a company that just continues to do what they did before and do it well.”

Last week, BlackBerry received a $40-million grant from the Canadian federal government to boost its autonomous vehicle and connected car software development. For its part, BlackBerry announced that it would be putting $310.5 million into vehicle R&D over the next ten years, aiming to get its QNX platform in more vehicles as the number and complexity of connected devices in cars multiplies.

“In today’s vehicle you have up to hundreds of electronic control units (ECUs) and they’re all separate. So, for instance, if you have automatic braking in your vehicle, that’s an ECU.… If you have automatic door locks, that’s an ECU,” said John Wall, head of BlackBerry’s QNX division, to the Financial Post last Friday. “The car of the future is going to be a consolidation of these functions on what we call a high-performance computer platform.”

BlackBerry has seen its share price rise in 2019, gaining 15 per cent year-to-date. The company’s last quarterly report came in late December when it posted a profit of $59 million compared to a loss of $275 million a year prior. On an adjusted basis, BB says it made five cents per share, which bested analysts’ consensus estimate of two cents per share. Revenue for the quarter was $228 million, which also beat the consensus of $215.7 million.

“They’ve done the right thing by shifting the company’s focus to encryption and the auto market,” says Hodson. “They still have the cash, sales are going down but margins are going up.”