Lots better stocks than BlackBerry, this investor says

It’s hard to let go of some stocks. Those that’ve been either hanging around your portfolio or at least on your mind for years, names that keep you wondering or perhaps a stock that brings back fond memories of better days in the market. It may be tough to admit it but like that old pair of sweatpants that truly belong in the trash, you’re probably better off giving up on BlackBerry (BlackBerry Stock Quote, Charts, News, Analysts, Financials TSX:BB). At least, that’s the gist of it from portfolio manager Kim Bolton, who thinks the days of supporting BlackBerry’s transformation dreams are done.

“I used to participate in Blackberry but I haven’t for the better part of a couple of years,” said Bolton, president of Black Swan Dexteritas, speaking on BNN Bloomberg on Wednesday.

“It’s become a shadow of itself,” he said.

BlackBerry announced on Wednesday that shareholders had rejected its executive pay plan, with a majority voting at an annual meeting against the company’s compensation plan in a ‘say on pay’ resolution. Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis & Co had both made ‘no’ recommendations on the vote.

The news may not come as a shock to followers of the company, though, since aside from a couple of spikes last year related to the meme stock craze the company’s share price has been on a multi-year slide, now touching territory not seen in about a decade. Add to that a current compensation package that has awarded CEO John Chen with millions of shares tied to the stock’s hitting certain price targets, ones that were achieved, however briefly, during last year’s spikes, and you’ve got a recipe for discontent.

BlackBerry’s woes are not all its own, of course, as tech stocks across the board are being hammered this year, while its business in IoT technology for connected cars has been tied to the trials and tribulations of the auto sector. At the same time, where the company once impressed with its ability to turn from hardware maker to software and security, the payoff has yet to be realized, as BlackBerry’s top and bottom lines seemingly haven’t grown at the pace expected by the now impatient market.

“They’ve innovated into the software side but like I’ve said before the software side is very much in the penalty box, even though their software is state-of-the-art when it comes to automotive security and enhancements and so on,” said Bolton.

“I just think there are a lot better opportunities, even on the software side and particularly on the cybersecurity side,” he said. “I think there’s just better opportunities with longer runways elsewhere than BlackBerry.”

BlackBerry put out a presser on Wednesday to say that its QNX software is now embedded in over 215 million vehicles, up by about 20 million from last year, with a range of auto manufacturers including BMW, Honda, Mercedes-Benz and Toyota. The company said the royalty revenue backlog related to QNX has grown to about $560 million, representing a 14 per cent increase.

“BlackBerry continues to be the clear market leader in safety-critical embedded automotive software, with consistent growth in vehicles count, from over 16 million in 2013 to over 215 million today. We are delighted to be trusted by automotive OEMs and Tier 1s around the world,” said Chen in a press release.

“Connected-autonomous vehicles are central to the development of smart cities, so as the two key markets that BlackBerry serves – IoT and Cybersecurity – converge into an interdependent and combined market, our growth in the automotive industry will accelerate the emergence of a trusted smart world,” Chen said.

Ahead of the release of its first quarter fiscal 2023 results on Thursday, BlackBerry last reported at the end of March where fourth quarter fiscal 2022 revenue was up a hair from $184 million a year ago to $185 million, while net income was $144 million compared to $74 million a year ago. For the full fiscal 2022, BlackBerry’s topline was down 19.6 per cent to $718 million and net income was $19 million compared to a loss of $1.113 billion a year earlier.