Buy BlackBerry stock and you are taking a big risk, this investor says

Thinking that with these low, low prices you should buy some BlackBerry stock?

Think again, says one investor.

Bargain hunters must surely be sniffing around BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB), which has dropped to lows not seen since the very early days of the smartphone era. Is the carnage over for the reinvented software and security company? That’s tough to call, says Benj Gallander, president of Contra the Heard Investment Letter, who says that while there’s a boatload of opportunity in BB, there’s also plenty of risk.

“I own BlackBerry. I paid $10.46 so I’m well underwater on it. I think you could have a pop within the next six months,” says Gallander, in conversation with BNN Bloomberg on Wednesday.

“I like this one still but I didn’t like it enough and I’m too wary to put it back to a Buy. I wonder if a younger Benj Gallander would have gone in because I was more of a risk-taker then,” he says.

BlackBerry’s slide over much of 2019 has been halted at least for a while over the past few weeks, with the stock milling around the high-C$6.00 range since the start of October. That was just after investors unceremoniously dropped BB after its latest quarterly release.

There, BlackBerry’s fiscal Q2 of 2020 featured adjusted revenue up 22 per cent year-over-year to $261 million and a net loss of $44 million compared to a profit of $43 million a year earlier. On a per share adjusted basis, the company broke even. (All figures in US dollars unless where noted otherwise.)

BlackBerry’s bottom line met the consensus estimate but the $261 million top line was lower than the expected $266 million in revenue and where the company’s enterprise software and technology solutions segment saw a five-per-cent drop in revenue to $134 million, analysts were expecting $150 million.

Just as troubling was management’s lowered guidance which said that fiscal 2020’s revenue would grow by between 23 and 25 per cent as opposed to the earlier statement of growth between 23 and 27 per cent.

And while the numbers weren’t devastating, the market took them as a sign that BlackBerry’s turnaround was still in the early innings and that the company’s big investment in cybersecurity company Cylance had yet to pay off.

It’s a negative sentiment that Gallander thinks may be a little overdone at the moment.

“I think it has a lot of potential. I still believe in [BlackBerry CEO John Chen],” Gallander says. “I think that the reaction by the marketplace to the latest earnings was too weighty. I don’t think that it made sense to me.”

BlackBerry made news this week with a new research report on mobile phone malware, which argues that global mobile attacks are “much more pervasive of a threat” than previously recognized, citing evidence of state and state-sponsored Advanced Persistent Threat (APT) groups which have been targeting operations and intelligence agencies through mobile malware.

“It should come as a surprise to many to learn how coordinated and long-standing the campaigns targeting mobile users have been, as they have been easy targets for APT groups because of a historical deficit in effective security solutions for detecting and preventing mobile malware,” said Eric Cornelius, BlackBerry Cylance’s Chief Technology Officer, in a press release.