Keep your eye on BlackBerry stock, this portfolio manager 

It has definitely not been for the faint of heart, owning BlackBerry (BlackBerry Stock Quote, Charts, News, Analysts, Financials TSX:BB), a name that’s been up and down a number of times this year and is still quite a bit in the black for 2021. What’s in the future for the company and stock? Portfolio manager Alex Ruus says the jury is still out, but combine that with his generally poor outlook on tech these days and BB is a negatory for the moment.

“Blackberry is in a really interesting situation. I like what they’re doing, but I don’t own the stock and I probably wouldn’t buy it here because I’m cautious that tech is going to underperform on a stock market basis in the next year,” said Ruus of Arrow Capital Management, speaking on BNN Bloomberg on Wednesday.

“So, the stuff you do own in tech, make sure it has good underlying free cash flow support, like a Microsoft or something like that,” Ruus said.

There are a lot of moving parts to consider with almost any company but perhaps BlackBerry is in the upper tier. It’s a former hardware company with a glorious past as an erstwhile mobile phone king, one which underwent a multi-year transformation to a software business with a dual focus on Internet of Things connectivity and cybersecurity. And while those sectors are definitely both hot topics where growth is expected for years to come, BlackBerry the company seems to be still finding its feet in terms of bringing home profits on a consistent basis.

Add to that a COVID pandemic which has played havoc with the auto sector where BlackBerry’s QNX embedded operating system makes its bread and butter, and, for good measure, throw in a retail investor rebellion this year which took up BlackBerry as one of its meme stocks to rally around, and altogether, you get a lot of uncertainty regarding a stock and company that still have a lot to prove.

Currently trading around C$12, BlackBerry shot up as high as C$31 in January of this year, fuelled by Reddit-led fans of stocks that reportedly had many bets against them in the form of short positions by hedge funds. Names like GameStop and AMC went through the roof and BlackBerry went with them, twice, as a second upsurge came in June. 

But even at C$12, BB is up around 42 per cent for the year, which may look good to current shareholders but is too expensive for Ruus.

“This is not a cheap stock,” Russ said. “They are turning the business and they have a very interesting position in the automotive software area and the security area is interesting.”

“The security business had a bit of a stumble recently and so people are still debating if it’s going to be long-term successful in that area. So, I think you want to keep your eye on it but there are better places to put your money right now, so that’s kind of my view on BlackBerry,” he said.

The company delivered top and bottom line beats in its latest quarterly report, its fiscal second quarter 2022, published on September 22. BlackBerry posted revenue of $175 million, a net loss of $144 million and, excluding items, an adjusted loss of six cents per share. That was in comparison to the Street’s call for $164 million and a loss of seven cents per share. (All figures in US dollars except where noted otherwise.)

But those numbers were still down from a year ago where the top and bottom lines were $259 million and a net loss of $23 million, while CEO John Chen stayed upbeat in his comments on the company’s prospects.

“Revenue for all businesses beat expectations this quarter.  The Cyber Security business unit delivered robust sequential billings and revenue growth and the IoT business unit performed well in the face of global chip shortage pressures,” said Chen in a press release.

“In IoT, design activity for our QNX products remains very strong, demonstrating both our industry leadership position and secular trends, such as ECU consolidation. In Cyber Security we received strong third-party validation of the effectiveness of our AI-driven, prevention-first suite of products, illustrating progress made with recent product launches,” he said.

By segment, revenues were $120 million for BlackBerry’s Cyber Security business, $40 million for its IoT business and $15 million in its Licensing segment.

BlackBerry recently appointed John Giamatteo as new President of Cyber Security, former President at McAfee where he was responsible for sales, marketing and customer success.

“I’m excited to be joining BlackBerry and to be leading the Cyber Security business unit. Never has the threat of cyberattacks been higher, nor more in the minds of management,” said Giamatteo in a press release. “BlackBerry’s AI-driven, prevention-first technology is well placed to scale to meet the constantly evolving cybersecurity needs of companies everywhere. I’m very positive about the opportunities that we have as a company.”