Which way is BlackBerry stock headed?

Tech stocks continue to get hammered and that includes Canada’s BlackBerry (BlackBerry Stock Quote, Charts, News, Analysts, Financials TSX:BB), which is down to multi-year lows. And while management continues to beat the drum, now calling for positive earnings and cash flow by fiscal 2024, concerns persist over the company’s growth prospects in its two focus businesses, connected cars and cybersecurity.

BlackBerry brought out on Wednesday new long-term financial targets as part of its annual Analyst Summit, now calling for revenue to double in five years — from the $655 million reported in its fiscal 2022 (ended February 28) to $1.213 billion by fiscal 2027. The company expects the most growth to come from its Internet-of-Things segment, which it sees going from $178 million in fiscal 2022 to $443 million by fiscal 2027 while Cybersecurity is expected to go from $477 million in 2022 to $770 million by 2027.

“IoT Serviceable Addressable Market (SAM) is expected to grow at approximately 8-12 per cent per year from FY23 to FY26,” the company said in a May 18 press release. “Revenue growth for the IoT business unit is expected to exceed the market growth rate resulting in an increase in market share above the current level of 26 per cent in core automotive domains. Revenue from production-based royalties is expected to grow faster than revenue from the pre-production design phase, increasing the portion of total revenue from royalties.”

Notably, the IoT segment outlook does not include potential revenue from the BlackBerry IVY co-project with Amazon aimed at developing an intelligent vehicle data platform. But management clearly sees IVY as potentially adding a lot to the company’s top and bottom lines, pointing out in the Financial session of the Analyst Summit that IVY is a recurring revenue opportunity with currently “no comparable competition” and a Serviceable Addressable Market of about $800 million by fiscal 2025. BlackBerry said its execution strategy on the project, first announced in 2020, remains on track and IVY continues to add new ecosystem partners, with expected design wins in fiscal 2023.

“[BlackBerry] held an analyst event yesterday. They said they plan to invest 30 per cent of revenue on research and development in fiscal 2023,” said BNN Bloomberg’s Kumutha Ramanathan in a Thursday report. “You would think this would be something that excites the market [but] you can see it closed in lower territory [on Wednesday], slumping to some of its lowest [levels] for the 12 month period.”

BlackBerry’s ups and downs in recent years could fill a book or two, with the company working hard over much of the 2010s to right the ship and transform itself from handset maker to software company, only to have that evolution seemingly take longer than the market would have wanted. BB’s share price did well over 2016 and 2017 in anticipation of its coming out party but with the cake and ice cream still a distant dream, investors started heading for the exits in 2018, causing the stock to drop to levels not seen in a decade. 

News of the Amazon/IVY partnership brought some life to the stock in later 2020 but it was the meme stock craze of early 2021 that really surprised, as BlackBerry had the good (or bad, depending on your persuasion) fortune of being looped in with GameStop and AMC as a name for the masses to trumpet. The result was BB going from $8 at the start of 2021 to as much as $31.49 by late January, and that on no new news from the company. 

After came the almost as quick fallback, then another Reddit-inspired wave in May and June which was followed by a longer decline. The general market rotation away from tech stocks over the past half-year hasn’t helped matters, either, with software companies taking it on the chin. Year-to-date, the tech-heavy NASDAQ Index is now down about 28 per cent, while the North American Tech-Software Ishares ETF, which tries to track the performance of the SP North American Technology-Software Index, is down about 32 per cent this year. 

Either way you slice it, the end result for BlackBerry is that it’s back down to $7 and change. 

Whether BB will have an upside over the second half of the year is anyone’s guess, although the company remains clearly upbeat about its now very long-haul pivot into software.

Commenting on his company’s latest reported quarter, its fiscal Q4 2022, along with the path ahead, CEO John Chen said in a press release, “We’re pleased with the progress that BlackBerry made this quarter. The IoT business recorded its first $50 million-plus revenue quarter since the start of the pandemic.”

“We’re also excited about the prospects for the Cybersecurity business given another quarter of billings growth and further strengthening of the team with industry expertise in both sales and product development,” he said. “The key components are in place and we expect continued billings momentum this year.”