BlackBerry Ltd. (NASDAQ:BBRY) is no stranger to pessimism, with shares of BBRY stock down almost 90% from their 2011 peak. That includes a tailspin of about 19% since Jan. 1, too.
And given increasing dominance of Apple Inc. (NASDAQ:AAPL) and Google Inc. (NASDAQ:GOOG), many think the company has already lost the smartphone war.
But BBRY stock execs aren’t ready to admit defeat just yet. The relative success of the most recent BlackBerry smartphone, the Passport, has created a glimmer of hope. And management at BBRY is committed to a multiyear turnaround plan that will eventually focus the company on mobile software and free it from the need of competing with — and inevitably losing to — Apple iPhones or Android devices like the Galaxy line from Samsung Electronics Ltd. (OTCMKTS:SSNLF).
Of course, whether tech-hungry millennials will ever move over to the brand or whether older Americans will overlook previous tarnish to the BlackBerry name remain open questions.
But it’s undeniable that BlackBerry stock is making progress. After the 2013 ousting of Thorsten Heins, CEO John Chen has been slashing costs and helping BBRY stock fight its way back to within spitting distance of profitability. And across 2015, Chen has pledged to double software revenue for BlackBerry from $250 million to $500 million.
So … can BBRY pull it off?
Challenges Ahead for BlackBerry Stock
BlackBerry has long had cache thanks to its security, making it at one time the default hardware for corporate and government IT departments.
BBRY stock is hoping this brand appeal still exists as it takes the fight to companies like International Business Machines Corp. (NYSE:IBM), Oracle Corporation (NYSE:ORCL), SAP AG (NYSE:SAP) and other top enterprise software firms.
But as several analysts have said recently, that’s easier said than done.
“BlackBerry is going to be a just fraction of its former self,” HS Global Ltd. analyst Wayne Lam told The Deal. “It’s going to be very, very specific in terms of what it can offer, in terms of enterprise security and software.”
To his credit, chief executive Chen is aware that there are detractors out there, even going so far as to say in the recent BlackBerry earnings call that investors should be patient — not just with BBRY stock, but with its partners as it rolls out this new business model. I particularly like this gem of an exchange:
Maynard Um of Wells Fargo asked, “But when should we start to expect that software line to start seeing that material ramp up?”
Chen responded, “Two quarters … I got to get the carrier trained.”
BBRY Stock May Be a High-Risk, High-Reward Buy Here
So should investors give BBRY stock those two quarters to get its act together?
It’s a risky move, to be sure, but I say it is worth taking a flyer on. BlackBerry is still sitting on $2.8 billion in cash and is running at nearly breakeven, so there shouldn’t be fears about the company not being capitalized well in the immediate term.
Furthermore, the comparative success of the Passport and the continued efforts to restructure under Chen are yielding tangible results.
The problem of continued revenue declines is indeed real, and a risk investors should not overlook. But the company is trading at just 1.2 times sales right now, so it’s hardly like BBRY stock is trading for a premium.
Only aggressive traders should be willing to take this bet, but there’s a chance BlackBerry does indeed see the software sales it has predicted — and perhaps even before Q3 as Chen offered up in a very sober and realistic earnings call.
If that happens, we could see a significant snap-back and double-digit gains in a hurry for BlackBerry stock.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
