RBC raises price target on BlackBerry

RBC Capital analyst Paul Treiber has raised his price target on BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) but in a Monday update he said the growth prospects for the Canadian tech company are still challenged.

Connected tech and cybersecurity company BlackBerry made waves earlier this month with the announcement of a new deal with Amazon Web Services to work together on a cloud-connected platform for cars, enabling automakers to deliver in-vehicle applications.

BlackBerry, on a multi-year skid since the market seemingly soured on the company’s about-face from phone-maker to software and security provider, said its Intelligent Vehicle Data Program or IVY would soon become the across-the-board platform used to gather sensor data in cars for monetization purposes.

“BlackBerry IVY addresses a critical data access, collection and management problem in the automotive industry,” said the company in a December 1 press release. “Modern cars and trucks are built with thousands of parts from many different suppliers, with each vehicle model comprising a unique set of proprietary hardware and software components. These components, which include an increasing variety of vehicle sensors, produce data in unique and specialized formats.”

The company said IVY will apply machine learning to collected data to help automakers deliver in-vehicle, “highly personalized” experiences, while the partnership with AWS, first brought to light earlier this year at CES 2020 in Las Vegas, will see AWS’s cloud computing powering BlackBerry’s QNX connected car platform.

“BlackBerry IVY will build upon BlackBerry QNX’s capabilities for surfacing and normalizing data from automobiles and AWS’s broad portfolio of services, including capabilities for IoT and machine learning,” said BlackBerry.

“BlackBerry IVY will run inside a vehicle’s embedded systems but will be managed and configured remotely from the cloud. As a result, automakers will gain greater visibility into vehicle data, control over who can access it, and edge computing capabilities to optimize how quickly and efficiently the data is processed,” the company said.

BlackBerry’s share price had already been on the upswing before the December 1 announcement where it vaulted from C$7.65 per share to as high as C$12.54 before settling down into the mid-C$10.00 range over the past week. The lift has taken BB’s 2020 return from red to black, where it is now up 26 per cent year-to-date.

In his update, Treiber said BlackBerry’s recent rise expresses current investor enthusiasm for value plays in the market and a faith in BlackBerry’s long-term potential despite continued near-term headwinds in the auto industry.

Treiber maintained his “Sector Perform” rating for BB but raised his 12-month target from C$5.00 to C$7.50, which at the time of publication represented a projected return of negative 29 per cent.

“[Treiber) had a C$5 target price and BlackBerry over the last few weeks has shot ahead [of that],” said BNN Bloomberg’s Jon Erlichman, speaking on Tuesday. “The analyst acknowledges this is a view that people’s opinion of BlackBerry has changed and people are seeing it as perhaps a value play in a market where we’ve seen other tech stocks outperforming.”

“[Treiber] did clarify that this is not a reflection of his expectations for the upcoming earnings for Blackberry, which are scheduled for release on Thursday of this week,” Erlichman added.

BlackBerry last reported earnings in late September where the company’s fiscal second quarter 2021 featured a loss of $23 million on revenue of $259 million compared to a loss of $44 million on revenue of $244 million one year earlier. (All figures in US dollars except where noted otherwise.)

On an non-GAAP basis, BB’s earnings were $0.11 per share and revenue was $266 million, which were both better than the consensus estimates at $0.02 per share and $238 million. For the upcoming fiscal Q3, analysts are calling for an EPS of negative $0.01 per share on a topline of $224.7 million.

On the new announcement with AWS, BlackBerry CEO John Chen said the two companies “share a common vision” regarding the auto industry and its potential to deliver new services to its customers.

“[The BlackBerry IVY] software platform promises to bring an era of invention to the in-vehicle experience and help create new applications, services, and opportunities without compromising safety, security, or customer privacy. We are pleased to expand our relationship with AWS to execute this vision and deliver BlackBerry IVY,” Chen said in the press release.

AWS is the largest cloud computing company globally, reporting $11.6 billion in revenue for its latest quarter, which was up from $8.9 billion a year earlier. Last week, ViacomCBS announced it would be putting all of its broadcast TV operations on the AWS cloud, calling it among the largest cloud-based initiatives in the media and entertainment industry.

“The migration will enable ViacomCBS to drive greater efficiencies and cost savings, simplify access to content for its licensing partners, and reliably deliver new viewing experiences to consumers by broadcasting and streaming content on any device,” said AWS in a press release.