It’s been a while now since BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) was a top player in the mobile handset space and although its stature has shrunk in that respect, the market hasn’t taken to BlackBerry version 2.0.
And that’s too bad for the market, says Stephen Takacsy, who thinks investors should be paying attention to the undervalued stock.
Takacsy, president and CEO of Lester Asset Management, feels not only is BB a good buy at its current share price — and has labelled BlackBerry a Top Pick for the next 12 months —but the company would also be a cheap acquisition for a larger tech firm, resulting in a nice payday for BB shareholders.
“This is an extremely undervalued company, probably the most unloved Canadian tech company…”
“This is an extremely undervalued company, probably the most unloved Canadian tech company,” said Takacsy, speaking on BNN Bloomberg on Tuesday. “People don’t realize that it’s a pure security software company now with several recurring revenue streams.”
“Enterprise security software Is their core business, with the QNX operating system in 175 million automobiles, Cylance cybersecurity software which they acquired a few years ago, and they’ve integrated those products into BlackBerry Spark now. And, of course, they have this very lucrative IP patent licensing portfolio which is a cash cow with super-high margin,” Takacsy said.
BlackBerry’s share price has found a range between $6 and $7 over the past few months, a long way down from the mid teens where it traded a couple of years ago. The company has made progress in its reinvention as a software and security business, not only in picking up contracts with major automakers for BB’s QNX platform but gaining ground with its government clients as well.
Just this week, BlackBerry announced the United States Air Force had chosen the Spark productivity platform to handle its endpoint management and security system.
“BlackBerry and the United States Federal Government have been trusted partners for over twenty years,” said BlackBerry CEO John Chen in a press release on Tuesday. “The United States Air Force has a rich history and a critical mission across air, space and cyberspace. We are proud to be their partner and to provide them superior technology that enables their operations.”
Takacsy said that while BlackBerry has made some questionable moves along the way, the valuation gap between it and its peers is significant.
“BlackBerry doesn’t get a lot of respect because they’ve missed guidance several times so management has a bit of a credibility problem, and the board has a bit of a credibility problem in terms of corporate governance as we saw recently with the refinancing of the convertible debenture where several shareholders filed complaints with the TSX,” Takacsy said.
“So, I think there should be some changes on the board in this company, [but] I think it’s getting a big discount because of those issues. It’s only trading at 2.2x revenues versus comparables that are trading at two to three times that,” Takacsy said.
“BlackBerry would be a great acquisition for Microsoft or Google or Samsung and the like. So, we’re hoping to see a monetization one day for shareholders,” he said.