What’s interesting about BlackBerry Ltd (NASDAQ:BBRY) stock is that it’s a completely different company than it was just a few years ago. And BlackBerry stock is a very different stock than it was just a few years ago. Whether that’s good news or bad for BBRY stock is the key question.

As I wrote last month, BlackBerry stock now is a growth play, after years of being a value stock. Before BlackBerry exited its hardware business, the bull case for BBRY stock was based on a large cash balance plus the potential for a turnaround from handsets.

BlackBerry still has that large cash balance, one boosted by a recent royalty win from Qualcomm, Inc. (NASDAQ:QCOM). But it’s now firmly a play on growth in relatively new software and services offerings.

There’s some reason for optimism. But even with BlackBerry stock below $10, there’s more reason for caution. BBRY stock no longer is cheap by any real measure. In fact, it’s pricing in years of substantial growth from its new efforts. And at the moment, it looks like it’s pricing in too much growth.

The Bull Case for BlackBerry Stock

Going forward, BlackBerry is a software and services play. On the Q1 conference call, CEO John Chen cited four “growth engines” going forward:

• Enterprise software, aka unified endpoint management. This software secures corporate data across devices. Ironically, UEM tackles the “bring your own device” problem for businesses. That BYOD trend led in large part to BlackBerry’s handset market share erosion against Apple Inc. (NASDAQ:AAPL), as BlackBerry’s advantage in device security became less and less important.
• Embedded software for connected cars and other mobile endpoints.
• IoT appliances such as BlackBerry Radar, used to manage trucking fleets and now expanded to intermodal containers.
• Technology licensing

The opportunity that is getting the most attention is connected cars. Noted short-seller Citron Research even called BBRY stock “the next” Nvidia Corporation (NASDAQ:NVDA) based on potential gains in that market. But BlackBerry’s reliance on struggling Ford Motor Company (NYSE:F) seems a concern, and its recent loss of Toyota Motor Corp (ADR) (NYSE:TM) as a customer could present a near-term headwind.

BlackBerry is going to have win in a very tough autonomous driving space, because the other opportunities simply don’t seem like quite enough for a business still valued at ~$3.6 billion plus net cash. In UEM, competition will be tough. Mobileiron Inc (NASDAQ:MOBL) is one of two entrenched market leaders along with a unit of VMWare, Inc. (NYSE:VMW).

BlackBerry has had some wins with Radar, including a project with FedEx Corporation (NYSE:FDX). But there are myriad competitors attempting to roll out IoT solutions for transportation, including Park City Group, Inc. (NASDAQ:PCYG). And licensing and IP revenue was just $32 million in Q1, though management expects that revenue to ramp as the year goes on.

BlackBerry likely is going to have to win in more than one area to drive the 10-15% revenue growth it’s targeting this year, and to leverage steadily increasing operating expenses. BlackBerry at the moment is barely profitable. It will need substantial earnings improvement to keep BBRY stock even near $10, let alone solidly in the double-digits.

BBRY Stock Isn’t Cheap

It’s possible that BlackBerry can drive the growth needed for BlackBerry stock to gain. But at the moment, I’m skeptical. And given the long, frustrating history of BBRY stock, this remains a “prove it” story.

That’s particularly true since BBRY stock is not at all cheap. It trades at nearly 4x revenue on an enterprise basis. Backing out dilution, FY18 earnings and free cash flow both likely will be negative.

To change that, BlackBerry needs to win in markets that are either crowded and/or where the company has little to no existing presence. To be fair, there’s potential for some support from handset licensing and IP monetization. But neither is close to enough to support a $3 billion-plus valuation, as BBRY stock holders have learned over the past 5-6 years of basically zero returns for BlackBerry stock.

The core issue here is that BlackBerry now is a growth stock. But it’s not a company that has established – at least not yet – any ability to grow in the way that BBRY bulls expect. It’s not impossible – but it will be a tough road for BlackBerry. And I think it’s too tough a road to bet on BBRY stock, even below $10.

As of this writing, Vince Martin did not hold a position in any of the aforementioned securities.