BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) has had a rough go both this year and last as the market continues to grow impatient with the company’s remodeling from cellphone maker to software and services company.
But investors should seriously consider buying the stock at these levels, says fund manager Stephen Takacsy, who thinks the company is one good board shakeup away from turning this thing around.
BlackBerry closed up two per cent on Wednesday, a welcome sign for a stock that’s been in the tank for the past couple of months. BlackBerry hit a low of C$6.48 per share in early October, territory that the stock hadn’t visited since the collapse of its smartphone business in 2013 and before talk of a turnaround had sparked new interest in the name.
But BlackBerry 2.0 hasn’t yet turned out exactly as planned, despite claims from CEO John Chen that the work has been mostly completed and prominently capped off with the major purchase earlier this year of cybersecurity business Cylance.
A lack of revenue growth from Cylance has been a bone of contention among BlackBerry’s critics who have pointed to much better-looking Crowdstrike in the cybersecurity field for comparison’s sake.
BlackBerry in its latest quarterly earnings delivered in September missed estimates on earnings as well as offered lowered guidance going forward, while analysts also pointed to shortfalls in growth from BlackBerry’s Internet of Things segment and its cybersecurity business as contributing to a gloomier picture on the stock and company.
But while all of that negative noise deserves notice, there’s a lot that BlackBerry has to offer, if management would only get out of its way, says Takacsy, who says a name change from BlackBerry to something with less connection to the no-longer-relevant cellphone brand.
BlackBerry board has some “dead wood”…
“There should probably be some changes on the board. There’s some dead wood on the board, and there’s no excuse for this stock, with the technology and IP that it owns to be trading at these prices. A name change is probably not a bad idea as well,” said Takacsy, president, CEO and chief investment officer at Lester Asset Management, speaking to BNN Bloomberg on Wednesday.
“But at the end of the day, the company has to execute and it has to explain to investors that this is 100 per cent a software company now with growing recurring revenues in various areas where they are leaders, whether it’s security software or the QNX system and platform in automobiles where they’re gaining a lot of market share,” Takacsy added.
“Obviously, there’s a major image problem here and I think that the board can do a much better job of unlocking shareholder value,” he says.
BlackBerry’s share price is currently down 23 per cent for 2019 and down 47 per cent since the start of 2018.
Takacsy says that BlackBerry’s stable of patents and IP could make it a possible takeout target.
“They have a very valuable IP portfolio which they license out which could be monetized for at least what the shares are trading at today. This is a company that would make an attractive acquisition candidate for Google or Microsoft at probably two to three times what it’s trading at today, so obviously something is wrong in terms of the image of the company for it to be trading at these low levels,” he says.
“But it’s a tremendous buy and I’m convinced that they’re going to do the right thing down the road but I think that they need some fresh blood,” said Takacsy.
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