After reviewing a transcript of a January interview featuring two top BlackBerry (NYSE:BB) executives, I believe that Amazon (NASDAQ:AMZN) and BlackBerry are collaborating to build an app store for connected vehicles. Since the partners have major advantages in this space, I expect the app store to be quite successful and become a meaningful, positive catalyst for BB stock.
On Jan. 12, John Wall, the co-head of BlackBerry Technology Solutions and Steve Rai, the company’s CFO, were interviewed by JPMorgan analyst Samik Chatterjee. The interview was part of the bank’s Tech/Auto Forum Conference.
During the discussion, Wall revealed how IVY, the initiative that BlackBerry is undertaking with Amazon, will facilitate the creation of apps for vehicles.
BB Stock and the Connected-Car Future
Amazon and BlackBerry are working on methods to make the Application Program Interfaces (APIs) of connected vehicles look similar. They are also seeking to make the data from vehicles consistent. According to Wall, that’s not an easy task because all vehicles have different electrical architectures and use different sensors.
IVY will be a “translator” that will convert data into information that can be used to help in making decisions. Moreover, automakers can monetize the data and use it to save money, Wall explained.
But the executive said IVY can also be used to “grow an ecosystem that allows scale and allows app developers to create common applications.”
Chatterjee, the JPMorgan analyst, first used the term “app store” during the session, asking “How will the IVY app store ecosystem be monetized?”
Wall responded by saying that BlackBerry was not sure about the answer to that question. He did, however, report that, after speaking with a number of automakers, BlackBerry is sure that a combined app store and data clearinghouse would have a lot of value.
Moving the Needle for BB Stock
I agree with that premise. Indeed, a few years ago, I wrote that BlackBerry could make real money by selling ads, data, extra security features, and apps for driverless cars.
I got a few of the particulars wrong; instead of focusing just on driverless cars, BlackBerry will focus on all connected cars. And instead of selling apps itself, the company, in partnership with Amazon, will apparently focus on building an App Store.
However, given the large amount of money that Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) have obtained from their app stores, I’m confident that BlackBerry can obtain enough revenue from its own app store to seriously move the needle for BB stock.
And, just as Alphabet and Facebook (NASDAQ:FB) have been able to very effectively monetize user data, I’m confident that BlackBerry will be able to do the same.
Originally, I predicted that BlackBerry would be able to generate $4 billion annually from apps and data by 2028. However, the company has started down this road later than I thought it would, and it will probably have to share half of the revenue with Amazon.
Therefore, I now expect BlackBerry to generate $1 billion of annual revenue from IVY by 2028. Since the profit margins from the initiative will be quite high, I expect IVY to generate about $800 million of operating income for the company by that year. By 2024, I expect the initiative to raise BlackBerry’s operating profit by at least $200 million.
Over the past 12 months, BlackBerry’s operating income was -$74 million. Therefore, I expect IVY to meaningfully boost BB stock.
The Bottom Line
BlackBerry’s QNX operating system is already in over 175 million vehicles and provides top-notch safety and security, both of which are extremely important in vehicles. Those facts, along with the power of Amazon, will make IVY extremely successful, lifting BB stock tremendously over the long-term.
On the date of publication, Larry Ramer held a long position in BB.
Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.
