Is BlackBerry really a long-term hold?

Who would’ve thought a year ago that Canada’s BlackBerry (BlackBerry Stock Quote, Charts, News, Analysts, Financials TSX:BB) would be one of the more interesting stocks in 2021? But after some major ups and downs over the past few months, here we are wondering if BB is actually one of the good ones, now with enough solid growth prospects to make it a long-term buy-and-hold.

On that topic, portfolio manager Andrew Pyle says, for sure, BlackBerry’s connected tech and cybersecurity prowess are going to benefit shareholders for years to come. And Pyle thinks BlackBerry’s ability to win contracts in the automotive sector is where investors should be focused.

“The key reason we like that space right now,” said Pyle, investment advisor at CIBC Wood Gundy, who gave BlackBerry his Top Pick status for the next 12 months on a BNN Bloomberg segment on Monday.

“I think BlackBerry is well positioned. You talk about meme stocks and obviously Blackberry has been caught up in that space. [But] this is a company right now I think that’s well positioned to capitalize on expertise on the software side with respect to vehicles, which we know is just going to get stronger and the industry is going to grow leaps and bounds,” he said.

“So, we like BlackBerry. It has not been very exciting in the last little while. We like the levels that we’re currently at. But I think in for investors, this is one that I’d be looking at for at least a five to ten year hold,” Pyle said.

BlackBerry has so far been swept up twice in the Reddit-fuelled retail investor blitzing of a few notable down-on-their-luck names to which the so-called swarming masses have taken a shine. There was GameStop and AMC and there was Bed Bath and Beyond and BlackBerry, all of which got their share prices boosted considerably on little to no news, save for the fact that a few hedge funds had big short positions on the stocks. That was enough to get the mob activated, and in BlackBerry’s case, it was enough to take the stock from about C$9.50 at the start of January to a crazy C$31.00 by later that month. 

The same happened in June, again on little of substance to report, when BB doubled from C$10 to C$20 in the matter of a few trading sessions. The stock has since slipped and is now down to about C$13, but those are still healthy gains for shareholders, some of whom may have been hanging onto BlackBerry through the recent rough times of sub-C$7.00 territory.

Beyond the stock price, 2021 has held a number of significant achievements for BlackBerry, which keeps on picking up converts to its QNX software for connected vehicles. Volvo signed on in April, while Chinese electric car maker WM announced a deal with BlackBerry in May. By June, the company said over 195 million vehicles had embedded QNX systems running their electronics and critical systems, an increase of 20 million from a year earlier.

“BlackBerry continues to clearly demonstrate its leadership position in safety-critical embedded automotive software, with both an increased vehicle count and strong growth in royalty revenue backlog. Achieving over 195 million vehicles marks the sixth consecutive year that this count has increased,” said John Chen, Executive Chairman & CEO, BlackBerry, in a June 21 press release.

“We continue to innovate our platform, which further strengthens our market advantage.  BlackBerry QNX is very well positioned to capitalize on the secular trends of greater safety-critical software in the car, the transition to electric vehicles and the move towards autonomous drive,” Chen said.

BlackBerry had showed a lot of promise as it emerged from its smartphone days with a new focus on software and security, starting in the mid-2010s. But sometime around 2018, investors seem to have grown impatient with the turnaround, which had yet to deliver the growth prospects earlier anticipated. BlackBerry’s revenue was climbing in fits and starts and then hit a wall as the auto sector started languishing last year. 

Ahead of fiscal second quarter 2022 results due next week, BlackBerry last reported in late June where its fiscal Q1 scored a beat of analysts’ estimates on revenue. BB’s topline of $174 million was down from $206 million for the first quarter 2021 but still better than the $171 million Street forecast. The company posted a net loss of $62 million or $0.11 per share compared to a loss of $636 million or $1.14 per share a year earlier.

“This quarter we aligned the business around the two key market opportunities – IoT and Cyber Security. In IoT we are pleased with the strong progress of the auto business, despite global chip shortage headwinds,” Chen said in a press release.

“Design activity remains strong, the number of vehicles with QNX software embedded has increased to 195 million, and royalty revenue backlog grew by 9% year-over-year.  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,” he said.