BlackBerry’s stock is too volatile, this investor says

But resist that temptation, says analyst Ryan Modesto, as there’s just too much volatility surrounding the company for investors to be risking their money.

With its share price already at a multi-year low and apparent impatience growing in the market with respect to the company’s turnaround and remodelling, BlackBerry fans got another shot of bad news this week with management’s announcement that chief operating officer Bryan Palma was stepping down from his post, citing a desire to pursue other options.

Only on the job since January, Palma was originally touted as an important addition to the BlackBerry team and placed as lead of its Internet of Things segment, which includes the company’s QNX platform geared towards the autonomous vehicle and connected car industry.

The stock is currently in the low (C)$7.00 range where it has languished since the company’s latest earnings report in late September.

That saw BlackBerry post a net loss of $44 million in comparison to a profit of $43 million a year earlier. Revenue was up 22 per cent year-over-year but the company experienced a drop of five per cent in its enterprise software and technology solutions segment. Management guided lower, as well, calling for fiscal 2020 revenue growth of between 23 and 25 per cent compared to its earlier forecast of growth between 23 and 27 per cent.

Modesto, chief executive officer of 5i Research told BNN Bloomberg on Thursday that the up and down nature of BlackBerry’s share price is emblematic of the company’s lack of consistency.

“From a stock perspective, it’s a name that we’ve never been able to get too comfortable with over the last five years or so,” Modesto said. “The problem is that the earnings are very inconsistent. The company can move ten per cent or more on any given earnings release and oftentimes you see results that you just weren’t expecting.”

“With the volatility and an inability to really find their market niche or that space where they can grow revenues, until they find that we think that it’s a hard name to own. We’d probably be on the sidelines and wait for that momentum and consistent revenue growth to start to occur,” he says.

BlackBerry’s big foray into cybersecurity came with the acquisition of California-based Cylance, a move which has so far failed to impress investors through its slower than expected revenue generation, especially in comparison with other names in the space such as CrowdStrike which is growing its top line and catching investors’ attention after its IPO this past June.

Modesto says that although there’s lots of potential, it remains to be seen whether BlackBerry’s IoT and cybersecurity businesses succeed as planned.

“If the autonomous car and security stuff actually works out for the company, it could be a big business, but they’re not the only one who does it. There’s competition out there, and with everything we see about the company it looks like they’re not going to be the number one player in it either,” Modesto says.

“So, we think of it as a name to watch but it’s too volatile at this point and there’s a lack of consistency in the shares,” he says.