BlackBerry’s future looks bright, this fund manager says

It’s now been a couple of years since the initial excitement petered out over BlackBerry’s (BlackBerry Stock Quote, Chart, News TSX:BB) reinvention as a security and software operation. And while it’s taken a while for this train to get going, BlackBerry really does look like it’s finally fitting all the pieces together.

Investors should be paying attention to the beleaguered company, says portfolio manager Brendan Caldwell of Caldwell Investment Management, who thinks the company is well positioned to succeed in the COVID-19 era and beyond.

“I actually still use a BlackBerry,” Caldwell said, in conversation with BNN Bloomberg on Monday. “The screen is cracked in two different places. I was really holding out hope and I’m all over getting the new BlackBerry coming out in 2021.”

“And I don’t own the stock right now, but I’m seriously considering it because they’ve been through the long, dark teatime of the soul and it does seem that they’re beginning to get some traction,” Caldwell said. “I’m coming across a little more enthusiastic than I probably should be on a stock I don’t own yet, but it really does seem to me that having survived as long as they have, they are now in a position to catch the wave of all of the technology outsourcing that’s going on. But also, to be back in the hardware business, I think there will be a demand for that product.”

BlackBerry, whose operations now include enterprise software, Internet of Things technology, endpoint security and encryption as well as its patent and licensing business, reported quarterly financials last week, delivering its fiscal second quarter 2021.

BlackBerry grew its revenue by six per cent year-over-year to $259 million while reporting a GAAP operating loss of $22 million or $0.04 per share versus a loss of $44 million or $0.10 per share a year ago.

In non-GAAP terms, BB generated EPS of $0.11 per share whereas analysts had called for earnings of $0.02 per share. (All figures in US dollars.)

BlackBerry’s software business has been impacted by COVID-19, as the company has a lot of clients in the automotive space, which has faltered during the pandemic and resulting economic downturn.

But Caldwell thinks BlackBerry is in the right space when it comes to industry trends toward increased security of our technology.

“BlackBerry, it always has the feeling of security and it’s part of the reason I’ve owned it, and I think there’ll be a market for that because not everything on the world can go to the cloud,” Caldwell said. “So, yes, I’m enthusiastic about the stock and, no, I don’t own it yet.”

On the company’s second quarter results, BlackBerry CEO John Chen said they exceeded the company’s expectations in terms of revenue growth, despite the COVID-19 challenges.

“Continued demand for our secure ‘Work from Anywhere’ solutions remains a major driver for our BlackBerry Spark business, which performed well this quarter,” said Chen in a press release. “Some signs of recovery in auto production point to sequential revenue growth and a return to a normal run rate for QNX by early next year. Continued QNX design wins and significant cybersecurity partnerships position the business strongly for the future.”