BlackBerry is no Tesla, this investor says

BlackBerry (BlackBerry Stock Quote, Chart, News, Analysts TSX:BB) may be worthwhile as a trade but don’t expect your investment dollars to bring in a Tesla-like ten-bagger, says Scotia Wealth portfolio manager Greg Newman, who thinks over the long-term, the stock could end up around $8.50 per share.

BlackBerry’s share price ended the week on a down note, dropping almost 16 per cent in Friday’s trading as the market reacted to the company’s latest earnings report, its fiscal third quarter 2021.

There, the IoT software and security company recorded beats on its top and bottom lines, even as revenue slowed amid the tougher COVID-19-affected environment. Non-GAAP adjusted sales of $224 million were better than analysts’ consensus forecast at $219.7 million but were down from $280 million a year earlier. Non-GAAP adjusted earnings came in at $0.02 per share compared to analysts’ average forecasted loss of $0.01 per share and compared to last year’s gain of $0.03 per share.

“This third fiscal quarter, we continued to build on the momentum from our second quarter, delivering results in line with our outlook we provided,” said CEO John Chen in the conference call. “We delivered sequential revenue growth, both in the total software and services sections and as well as [BlackBerry Technology Solutions]. We continue to deliver positive EPS and positive free cash flow this quarter.”

At the same time, BlackBerry’s GAAP revenue was lower at $218 million, an 18-per-cent year-over-year decline, while the GAAP net loss was $0.23 per diluted share compared to a loss of $0.04 per diluted share for Q3 2019. And management indicated that full fiscal 2021 revenue would come in around $950 million, which would be about halfway between fiscal 2020’s revenue of $1,040 million and 2019’s $904 million.

BlackBerry’s growth this year has been slowed by among other things a downturn in the auto sector, a prime focus for the company’s connected tech. But the stock saw a nice bounce earlier this month on news that BlackBerry would be teaming up with cloud computing giant Amazon Web Services in developing an in-vehicle standardized platform for data collection and monetization.

Chen said in the conference call that the auto industry has so far been unable to effectively harness the trove of data created by today’s sensor-laden cars, a job that BlackBerry’s Intelligent Vehicle Data Program or IVY is taking on.

“The auto industry is not prepared to capture and create value from the analytics because [this] data is difficult to collect and interact with, with our very costly integrations. BlackBerry IVY’s mission is to make it easy to gather, securely transport and analyze these data in a standard and a cost-efficient way across multiple brands and models on a common platform. This will allow the developers’ ecosystem to use the data to provide intelligent insights and application on a global scale,” Chen said.

“With BlackBerry IVY, we are creating a recurring revenue data business, recurring revenue model, that is, targeting revenue on a usage, as well as a subscription base,” Chen said.

But the way forward for BlackBerry is still a little unclear, said Newman, who thinks the promise that BlackBerry will once again become a tech superstar is looking less likely as time goes by.

“This is a name that I haven’t looked at for a long time,” said Newman, speaking on BNN Bloomberg on Friday. “I own some at around $6 just for taking a shot. It’s had a good run and I would have sold it, frankly, over the last couple of days but I didn’t want to pay capital gains at the end of December.”

“I don’t love it longer term. The story is becoming more interesting but they’ve had years and years trying to turn themselves around and become the next Apple or go pivoting from where Apple was to where Apple became,” Newman said. “And at some point, you’ve just got to go with other things.”

“I was looking at it as a trading stock, something that got oversold towards $6.00. I think our target on the name is about $8.50 and I think that’s probably where it’s ultimately going to go,” Newman said. “So, for investors that are really looking for that Hail Mary, I don’t think that BlackBerry is your name.”

Once valued at upwards of $140 per share back in its mobile handset days, BlackBerry’s more recent high was $18.00, hit in early 2018. The stock had been trading in the low $6.00 range for much of this year before jumping up during the last few weeks, closing on Friday at $8.85 per share.

Newman said, “I think people these days are looking for a Tesla, [saying], ‘If I’m going to take a risk, what sort of ten-bagger can I get?’ And I don’t think that’s the case with BlackBerry.”