The outlook for BlackBerry is good, this advisor says

BlackBerry (BlackBerry Stock Quote, Chart, News, Analysts, Financials TSX:BB) has been on a month-long slide every since getting pumped up again by the latest meme stock buying frenzy, but investors who can see past this year’s considerable volatility will find a company well-positioned to take advantage of tech trends in the auto sector. That’s according to Scotia Wealth Management advisor Andrew Pyle, who likes BlackBerry for the long haul.

“You know, we recently started actually adding to BlackBerry in the portfolio, and it has nothing to do with it being a meme stock or whatever label you want to put on it,” said Pyle senior wealth advisor and portfolio manager of The Pyle Group at Scotia Wealth, who spoke on BNN Bloomberg on Friday.

“We just think the fundamentals for the stock are good when we start to build out [electric vehicles] and the software that’s going to have to be used in vehicles. I think BlackBerry is well positioned in that,” Pyle said.

It’s been a good decade since BlackBerry ruled the smartphone world, and while the turnaround from hardware to software hasn’t come without its ups and downs, there seems to be more clarity now on the company’s path going forward. Its cybersecurity segment is now grounded by endpoint security acquisition Cylance, bought in September 2020 for $1.4 billion, and BlackBerry’s connected car technology is pushing forward with its QNX operating system and getting more business in the auto sector.

As well, BlackBerry announced late last year details of a partnership with AWS on the IVY platform, aimed at setting the standard for in-vehicle applications and monetization as the auto industry looks to the next stages in its development in the form of both connected tech and electric vehicles.

But with the autos still in recovery mode from a COVID-induced downturn, BlackBerry is waiting for its growth prospects to pick up again. Witness the company’s latest quarterly earnings, its fiscal Q1 2022, delivered in late June, where BlackBerry’s revenue fell to $174 million from $206 million a year earlier. Analysts had expected $171 million in revenue. (All figures in US dollars except where noted otherwise.)

At the same time, BB reported an uptick in its QNX royalty revenue backlog which stood at $450 million, as the company brought in more contracts with automakers including Volvo and WM Motor.

“Design activity remains strong, the number of vehicles with QNX software embedded has increased to 195 million, and royalty revenue backlog grew by nine per cent year-over-year,” said CEO John Chen in a June 24 press release.

“Tangible progress continues to be made with BlackBerry IVY, including the launch of the IVY Advisory Council and the first investment by the IVY Innovation Fund. On the Cyber Security side, we announced two new significant product launches as part of our XDR strategy – BlackBerry Gateway and Optics 3.0. We continue to see strong pipeline growth for our new UES products,” Chen said.

But in reality, the company’s nuts and bolts have taken a backseat so far in 2021 as far as the stock is concerned, all thanks to the Reddit-inspired retail investor revolution which shot into the limelight in January by pumping up seemingly dead-in-the-water names like GameStop, AMC and Bed Bath & Beyond to unheard of levels. That led to a lot of hand-wringing over the state of the markets but it also had some carry-over effects on stocks like BlackBerry, which the meme stock investors seem to have taken a shine to.

BlackBerry’s share price was heading nowhere fast for what seemed like years, right up until it took off like a rocket in mid-January, vaulting from C$10 per share to as high as C$30 in the matter of about a week.

The inevitable crash followed, taking BB all the way back to ten bucks by mid-May. But another wave of buying in early June lifted the stock back into the C$20 range, while the ensuing weeks have been pulling it lower, with BlackBerry currently trading around C$14.

Pyle says despite the ups and downs, investors should be rewarded in the long run with owning BlackBerry.

“It’s not to say it’s not a volatile stock,” Pyle said. “I would not be playing this [as a trade]. I know there are going to be a lot of day traders out there thinking that’s the way I’m going to position [myself], but I think if you’re a long-term investor and if you’re looking for good, solid companies that have good or decent prospects, I think BlackBerry is in that [category].”

“We don’t have a massive position of BlackBerry. It’s not one of our top ten holdings but I do think the outlook for BlackBerry is good,” he said. “I think the levels that we’re at right now are probably decent to get into.”