Second acts are incredibly difficult to pull off for any business. But the technology sector exponentially and perhaps intractably raises the bar. Nevertheless, the re-envisioned BlackBerry (NYSE:BB) is asking prospective buyers to give them a chance despite the difficulties. Is BB stock worth your consideration?
At first glance, it’s hard not to be skeptical. An early pioneer of mobile connected devices, BlackBerry fans quickly christened their namesake products “CrackBerries.” However, Apple (NASDAQ:AAPL) launched their iconic iPhone, which rapidly deflated the market value of BB stock.
Desperately clinging to the outer edges of relevancy, BlackBerry attempted to reinvigorate their mobile devices by creating a hybrid smartphone with a physical keyboard. When that venture failed to generate enthusiasm, BlackBerry quit making their own phones. Instead, they entered the licensing game, thereby shielding them from a losing game.
Furthermore, the company restructured their business to provide enterprise-level connectivity solutions. On one hand, this move was much more relevant as it aligned with burgeoning tech trends. But on the other hand, without its flagship product, BlackBerry lost its brand identity. Not surprisingly, BB stock tumbled badly over the last two years.
And when you consider the financial picture, BlackBerry doesn’t offer much confidence. For instance, Stockrover.com gives BB stock an overall score of 41 due to a middling growth narrative and concerns about profitability. Additionally, BlackBerry has an excessive amount of goodwill on its books, which may lead to impairment charges in the future.
Thus, not too many analysts are optimistic about the company’s turnaround prospects. Of the eight covering BB stock, only one has a strong buy recommendation; the others are all holds.
Still, BlackBerry isn’t without its positives.
An Old Deal Could Lift BB Stock
Back in 2010 when BlackBerry had its original name, Research in Motion, the company acquired embedded systems specialist QNX. In some ways, the deal was an afterthought. At the time, BlackBerry used QNX technologies to power its tablet line called Playbook. Of course, that’s ancient history now.
But what isn’t lost to the dustbin of time is QNX’s embedded systems technology. Today, QNX has a quiet but immensely influential role in modern vehicles’ infotainment systems. No longer limited to just playing the radio, contemporary cars provide driver assistance mechanisms, digital instrument clusters, connectivity with smart devices and functionality updates, such as tire pressure warning systems.
Not only that, QNX has rapidly increased its footprint. According to BlackBerry Media Relations, the QNX software “is now embedded in more than 150 million cars on the road today. This is an increase of 30 million cars since the company reported its automotive footprint in 2018.”
Better yet, this figure could move much higher. According to Statista survey, in 2017, connected cars had a U.S. household penetration rate of 23.4%. According to their forecast, this figure could balloon to 73% by 2023. And by the end of this year, the penetration rate could hit over 47%.
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Already, BlackBerry’s QNX appears in major car brands such as General Motors (NYSE:GM), Toyota (NYSE:TM), BMW (OTCMKTS:BMWYY) and Mercedes-Benz, among many others. With its dominant presence and established reputation, it could easily capture more share as the industry rises.
Moreover, the existence of embedded technologies makes them vulnerable to hacking attacks. Here again, BlackBerry is well positioned due to their end-to-end security solutions, especially as it relates to connected car security. And as our transportation networks become increasingly digitalized, BB stock stands to benefit significantly.
A Risky but Viable Contrarian Play
As with any fiscally exposed company, BlackBerry is not for the faint of heart. Although its QNX acquisition is turning out to be a remarkably fortuitous deal, skepticism clouds BB stock. In other words, don’t expect a straight shot to market profitability.
That said, if I had to gamble on a speculative second act, BlackBerry is awfully compelling. Whether you see a fully automated transportation network in the future or one that still requires human input, embedded systems technologies has powerful applications either way.
So, as long as the company can stay afloat – and there’s no existential threat as far as I’m aware – BB stock has the very real potential of surprising folks. Just be sure to keep your seat belt on.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
