BlackBerry stock is down. Time to buy again?

Almost a month has gone by since BlackBerry (BlackBerry Stock Quote, Chart, News, Analysts, Financials TSX:BB) got tangled up in the Reddit-fuelled Gamestop drama, and while the stock has dropped plenty in the meantime, BB is still up significantly from where it was, say, three months ago. Where does BlackBerry go from here? A lot will depend on how well the company delivers on its promises to lead the IoT revolution, says portfolio manager Kim Bolton.

“We don’t own it. We have a portfolio of between 20 and 30 stocks and we’ve got 29 right now, and there’s lots out there that we’d like to buy but we have to stay focused,” said Bolton, president of Black Swan Dexteritas, speaking on BNN Bloomberg on Wednesday.

“On BlackBerry, we have a price target of $15,” Bolton said. “On the one hand, they’ve had some problems on execution. On the other hand, they’ve had some very, very bullish things that have happened, particularly on the partnership side.”

BlackBerry may be getting swept up in another round of social media-inspired trading this week, as shares of video game retailer Gamestop rose sharply on Wednesday and Thursday, while other favourites of this year’s so-called retail investor rebellion like AMC Entertainment and Nokia also got a boost. BlackBerry’s share price rose eight per cent on Wednesday, bringing the stock above $14, still a long ways from the $31 it closed at in late January but a notable step up nonetheless from the $6-$7 territory the stock hung out in for most of 2020.

The BlackBerry redemption story had been trucking along just fine a couple of years ago while investors were still liking the idea of the former phone maker reinventing itself as a software and security specialist. But as time went by and earnings weren’t growing at the expected pace, the market soured on BB, dropping the stock 44 per cent in 2018 and a further 13 per cent in 2019.

Last year looked to be more of the same, with quarterly financials showing the impact of a depressed auto sector on BlackBerry’s results. For the company’s fiscal second quarter 2021 delivered in September, BlackBerry showed revenue up a marginal six per cent and an earnings loss of $23 million or $0.04 per share.

But then BlackBerry surprised in December with an announced partnership with Amazon’s cloud computing business AWS. The two were said to be developing an intelligent vehicle data platform for in-vehicle apps and monetization, a potentially huge move, as it aims to promote BlackBerry’s IVY as essentially the standard operating system across all makes of vehicles, potentially a major revenue stream for years to come.

That’s as long as they can deliver on the promise, says Bolton, which remains to be seen.

“When they partnered with AWS, Amazon Web Services, to accelerate the development of their intelligent vehicle data platform IVY, which is actually going to run on the edge, like right into the vehicles — that partnership has a lot of good promise, but it’s always been an issue when it comes to the execution side,” Bolton said.

“So, we’re watching very carefully. We want to see that execution. It’s always the way with a lot of these technology companies where they’ll have a good business model, good intellectual property, but it always comes down to the execution. So, we’re watching Blackberry,” Bolton said.

BlackBerry’s stalled growth should be a red flag for investors, according to Canaccord Genuity analyst Michael Walkley, who in a client update on February 16 moved his rating on the stock from “Hold” to “Sell,” saying the recent run-up in has put BB in overvalued territory.

“With the volatility in the shares following recent unusual trading activity from a targeted short squeeze, the share price is above our increased price target, resulting in our downgrade to Sell,” Walkley wrote.

With his update, Walkley increased his target price for BlackBerry from $8.00 to $10.00, which at the time of publication represented a projected 12-month return of negative 27 per cent.

BlackBerry recently celebrated the release of a new edition of its QNX Hypervisor foundational software for embedded and IoT systems. BlackBerry said the Hypervisor 2.2 version will find its way into a wide variety of systems from rail and robotics controllers to vehicle digital cockpits and battery management electronic control units.

“BlackBerry QNX has decades of experience powering mission-critical embedded systems across a wide range of industries,” said Grant Courville, Vice President, Products and Strategy at BlackBerry QNX, in a press release. “With the release of QNX Hypervisor 2.2, embedded software architects and developers can continue to rely on our secure and reliable foundational hypervisor software to enable their system consolidation knowing that we continue to work in lock-step with advances in silicon and shared device standards such as VIRTIO.”