BlackBerry stock is not worth owning, this investor says

BlackBerry (BlackBerry Stock Quote, Chart TSX:BB) may have done a bang up job at remodeling itself in the wake of is demise as a cellphone maker but there’s still a lot to prove, says Michael Sprung of Sprung Investment Management, who says investors should wait for more clarity on
where BlackBerry’s earnings will come from.

“This is a company that over the last ten years has struggled to turn itself around and it has become much more of a software company, it’s no longer a hardware company at all,” said Sprung, to BNN Bloomberg on Monday.

“People are waiting, [saying], okay, now that you’ve done that, where are the earnings and where are the benefits going to come for the shareholders? They have yet to prove that that’s actually going to happen or that it’s on the near-term horizon,” he said. “I don’t know what’s going to happen with respect to BlackBerry but I really can’t build a fundamental case for owning it at this point in time,” he said.

It’s been an up-and-down year for BlackBerry, whose share price climbed 41 per cent between January 1 and late March, only to lose much of those gains in the following weeks. But the stock had a good week last week, buoyed by the news that the company’s Government Mobility Suite, a cloud-based endpoint management platform, had achieved Federal Risk and Authorization Management Program (FedRAMP) Ready status in the
US, a sign that could bode well for the company in terms of gaining new contracts not just with government agencies but private enterprises who see the FedRAMP stamp of approval as a show of the platform’s prowess on security.

“BlackBerry has been built on a foundation of trust, which is why governments, banks and other regulated industry organizations around the world use our software,” said Bob Day, President of BlackBerry Government Solutions, in a press release last Tuesday. “We remain committed to taking BlackBerry’s end-to end technology stack through FedRAMP’s stringent requirements, so that government agencies can leverage the full suite of BlackBerry capabilities in an integrated and highly secure FedRAMP cloud solution.”

Ahead of BlackBerry’s first quarter fiscal 2020 results due at the end of the month, the company’s last reported quarter came at the end of March and beat analysts’ forecasts for revenue with a $255-million top line, representing a nine-per-cent year-over-year growth rate, and a profit of 11 cents per share on an adjusted basis. Analysts had expected a profit of six cents per share. (All figures in US dollars.)

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