BlackBerry is still a pass, says RBC Capital

RBC Dominion Securities analyst Paul Treiber raised his target price on Canadian software and security name BlackBerry (BlackBerry Stock Quote, Charts, News, Analysts, Financials TSX, NYSE:BB) after the company’s annual analyst summit event on Wednesday, saying there are many moving parts, to BB but the path ahead to growth is looking clearer.

Waterloo, Ontario’s BlackBerry announced its long-term financial targets on Wednesday, saying it expects revenue over the next three years to have a CAGR of 12 to 15 per cent. By segment, guidance for its Internet of Things (IoT) business which includes its connected car tech is set at a CAGR of 18-22 per cent for fiscal 2023-26 (year end February), with revenue expected to go from $206 million in fiscal 2023 to $240-$250 million in 2024 and to $340-$370 in fiscal 2026. (All figures in US dollars.)

BlackBerry said its Cybersecurity segment should see comparatively smaller growth at nine to 12 per cent CAGR, with revenue going from $418 million in fiscal 2023 to $425-$450 million in 2024 and to $540-$590 million in 2026.

The company said its IoT business is seeing secular tailwinds driving larger designs and higher average selling price.

“BlackBerry is targeting additional IVY design wins in FY24,” the company said in a statement. “Management considers BlackBerry QNX royalty backlog to be the most relevant key metric for the IoT business.”

Also this week, BlackBerry announced early access to its next generation QNX operating system for automakers, one which adds a step-change in performance, according to the company.

“The automotive industry is redefining software in the vehicle,” said John Wall, Senior Vice President and Head of BlackBerry QNX, in a statement. “Automotive architectures are transitioning to zonal, central compute and ultimately Software Defined Vehicles.  The top to bottom scalability inherent to SDP 8.0, the QNX OS for Safety and the QNX Hypervisor makes this a natural choice for automakers looking for a total car OS.”

BlackBerry’s share price has stayed within the $3.50-$5.50 range over the past few months but remains down considerably over the past two years.

With his update, Treiber posted a “Sector Perform” rating while moving his target price from $4.25 to $5.00, citing “better visibility to growth” in its IoT business. At press time, Treiber’s $5.00 target represented a projected one-year return of negative seven per cent.