You may think that BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) has the mojo to make it big in the cybersecurity space and you may be right. Or not.
And it’s that gamble on a future that might not come to pass which should keep investors from investing in BlackBerry right now, says portfolio manager Lorne Steinberg, who thinks there are better options for your money.
BlackBerry’s rise from the ashes of its handset business has been much discussed and, for a while there, trumpeted as a true Canadian success story, as it looked like CEO John Chen’s efforts to remodel the hardware maker into a software business were truly bearing fruit.
From the outside, especially, things looked to be falling into place, as BlackBerry took up positions both in the so-called Internet of Things segment where it has so far picked up plenty of contracts for its QNX system used in the connected car and in the cybersecurity realm where a major acquisition last year of US cyber firm Cylance seemed to put BB on the map and headed for growth in a continually expanding sector.
Reality seems to have set in, however, as over the past two years a slower than expected revenue ramp and questions concerning Cylance’s potential have caused investors to flee the stock, in essence, with the question, can BlackBerry make it in the highly competitive software industry?
The answer is “unclear,” said Steinberg, and that should be enough for you to think about investing elsewhere, at least for the time being.
“We don’t own BlackBerry. They seemed to be heading in the right direction a number of times and then stumbled again. It’s really difficult to pick a software turnaround story,” said Steinberg, president of Steinberg Wealth Management, speaking to BNN Bloomberg on Wednesday.
“I would say that their move into cybersecurity, if they execute well and pull it up and gain market share, that is a huge place to be [since] cyber is a key issue for every firm,” he said. “But it’s so tough to figure out whether or not they’re going to be a success story in this or whether larger players are just going to eat their lunch.”
“We would just avoid and we prefer companies that are better positioned,” he said.
Ahead of BlackBerry’s fiscal third quarter results due on Friday, the company’s last quarterly results came in late September where it came in under analysts’ projections for revenue at $261 million, a 22-per-cent year-over-year increase, compared to the expected $266 million. BlackBerry posted a net loss of $44 million for its second quarter, while it met the consensus estimate on EPS at negative $0.04 per share. (All figures in US dollars.)
BlackBerry announced on Wednesday that it will be presenting its next-generation, AI-driven security and transportation solutions at next month’s CES 2020 in Las Vegas.
BlackBerry’s share price has slid lower both over 2018 and 2019. Year-to-date, BB is now down 23 per cent while since the start of 2018, the stock is down 47 per cent.