3 Reasons BlackBerry Ltd (BBRY) Stock Worries Me

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BBRY stock - 3 Reasons BlackBerry Ltd (BBRY) Stock Worries Me

So far this year, it seems that BlackBerry Ltd (NASDAQ:BBRY) has returned to its former glory. In fact, BBRY stock has logged a sizzling gain of 64.7%.

3 Reasons BlackBerry Ltd (BBRY) Stock Worries Me

So what’s going on here?

Well, the company has been showing nice traction with its turnaround — making a transformation to an enterprise software company. After all, as seen with the latest earnings report, BlackBerry pulled off a nice beat.

But the company’s balance sheet also got a boost. That is, back in early April, the company won a binding arbitration with Qualcomm, Inc. (NASDAQ:QCOM). The result was a windfall of $815 million.

All this is great, right? Absolutely. But I still think there should be caution. The fact is that BBRY stock has a long history of disappointments. In fact, despite the recent goods news, the company still faces some nagging issues, such as the following:

BBRY Stock No.1: Overheated

Granted, the recent success of BlackBerry deserves a bump-up in the stock’s valuation, but it does look like things are overdone.

Keep in mind that the company must still pull off a tough transition, as its legacy businesses quickly fade away. This is worrisome since the business software segment is still not growing at a hefty pace. For the full-year, the rate of increase is expected to range at about 13% to 15%.

What’s more, it also looks like the shares have seen a boost from the recent hysteria from the WannaCry virus. The thinking is that the company should get a boost from its security offerings. But for the most part, the virus has already fizzled.

BBRY Stock Issue No.2: The Auto Business

A key part of the growth strategy is QNX, which is essentially an Operating System for autos. No doubt, the industry is undergoing tremendous changes, which should help BBRY stock. It is also encouraging that Ford Motor Company (NYSE:F) has recently boosted its spending with QNX.

So what could go wrong?

Well, BlackBerry must take on some mega rivals, such as Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL). These companies have huge financial resources and top-notch engineering teams. But there is something else: An ecosystem of customers, partners and developers that understand core systems like iOS and Android.

Google’s recent I/O conference highlighted all this, which should make investors in BBRY stock worried. The tech giant is developing something called Android Automotive. According to InvestorPlace.com’s Brad Moon: “Google is pushing to make Android an embedded OS that runs your car’s systems — not just an infotainment system that runs on top. It has its first two partners in Volvo and Volkswagen AG (ADR)’s (OTCMKTS:VLKAY) Audi.”

GOOGL will also be able to leverage some of its other critical technologies, such as from its self-driving car efforts and artificial intelligence.

BBRY Stock Issue No.3: The Auto Business

The enterprise software market is certainly large and continues to grow at a nice pace, especially for cloud-computing. Yet there are still challenges. For example, potential customers can take a while to make purchase decisions. This means that revenues can be fairly choppy.

As for BlackBerry, the issues can be even tougher since the company’s brand is far from strong. Of course, the company nearly imploded because of the onslaught of AAPL and GOOGL in the smartphone market. So why might customers be confident when buying advanced software from BBRY?

I’m not sure.

And besides, the company must battle tough rivals across key markets. As for the security category, BlackBerry must contend with operators like Fortinet Inc (NASDAQ:FTNT), Palo Alto Networks Inc (NYSE:PANW) and Check Point Software Technologies Ltd. (NASDAQ:CHKP). Oh, and the company must fight with firms like VMware, Inc. (NYSE:VMW), Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corp. (NYSE:IBM) and SAP SE (ADR)(NYSE:SAP) in the mobile market.

Tom Taulli runs the InvestorPlace blog IPO Playbook as well as OptionExercise.com, which provides interactive tools & services for employee stock options of pre/post IPO companiesFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/3-reasons-blackberry-ltd-bbry-stock-worries-me/.

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