Here’s a good one for contrarian investors: lately, the market has been unimpressed with BlackBerry (BlackBerry News, Stock Quote, Chart TSX:BB), whose late-June earnings report has the stock now flirting with a five-year low.
But there’s a long-term success story in BlackBerry, says money manager John Zechner, who thinks the stock is a buy at these prices.
“I like this one in here, and I’m not liking a lot,” said Zechner, chairman and lead equity manager at J. Zechner Associates, to BNN Bloomberg on Monday. “I think John Chen should get a CEO of the Year award. It’s so hard to do that transformation technology, with the way that they went from the smartphones and the hardware to security software and embedded [technology]. I think it’s been phenomenal.”
BlackBerry released its fiscal first quarter results at the end of June, meeting analysts’ expectations for the most part with a top line of $247 million, up from $213 million a year earlier, and a net loss of $35 million, also better than the $60-million loss last year. (All figures in US dollars.)
But the stock dropped, nonetheless, furthering a slide that began in early April and has effectively erased all of its gains made over the first few months of the year. The blame has in part fallen on lower-than-expected Q1 results from BlackBerry’s cybersecurity segment, billed as the company’s future after it picked up the California-based firm Cylance last fall in a $1.4-billion deal. For the quarter, Cylance’s contribution was $32 million.
But Zechner contends that BlackBerry is well-positioned in the tech security sector.
“Anyone in the security software area is growing,” Zechner said. “They’ve got great penetration into the automobile [industry] and the smart car. All in, it’s a little high on valuation but in Canada, it’s one of the better long term growth stories and I think it’s re-achieved that.”
“They’ve run the old areas off to zero growth and now they’re purely into software. [The stock has] somewhat of a higher valuation, but they’re generating cash and they’ve got cash on the balance sheet,” he says.
“This is a completely different company and far better with more sustainable growth than it was before. It’s one of the few long names that I’ve added to recently, particularly in tech,” Zechner said.