In my previous column about BlackBerry (NYSE:BB) stock, I explored a few points that I believed the bears were overlooking. After conducting more research, I’ve found even more important points that BlackBerry’s critics are failing to take into account, including the potential, huge benefits that its partnerships can bring and the strength of its overall IT security offerings.
In general, the bears are also too focused on looking at the company’s past, rather than its likely much more lucrative future.
Underestimating BlackBerry’s Partnerships
In December, BlackBerry announced that it was partnering with Amazon’s (NASDAQ:AMZN) cloud unit, AWS, to develop BlackBerry Ivy, which BlackBerry called a “cloud-connected intelligent vehicle data platform.” According to the latter company, Ivy will provide vehicle makers with a secure means of evaluating data from their automobiles.
A December Motley Fool article warned that “BlackBerry hasn’t revealed if Ivy will actually boost its revenue per vehicle,” adding that “we need to see some concrete plans, design wins, and financial figures before assuming it will actually boost its QNX revenue.” (QNX is BlackBerry’s secure operating system that is used in 175 million vehicles. The operating system has been or is being adopted by 19 of the 25 largest electric-vehicle makers.)
But first of all, why would BlackBerry and Amazon devote their time and resources to developing Ivy if the system will not generate meaningful revenue? Further, we know that a number of companies, including Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB), monetize data to a meaningful extent.
Since that’s the case, BlackBerry and Amazon should be able to monetize the data they receive from vehicles. Indeed, as Motley Fool itself pointed out, BlackBerry itself says the deal with Amazon will “unlock new revenue streams and business models.”
Kayode Omotosho, another pundit who’s bearish on BB stock, worries in his recent column for Seeking Alpha that BlackBerry will not have enough resources to develop Ivy. But he seems to overlook the fact that BlackBerry’s partner on Ivy, Amazon, has virtually unlimited resources. I’m sure that the companies can work out a deal in which Amazon will pay for the needed investments up front and be compensated with Ivy’s revenue down the road (no pun intended).
Staying with Amazon, the Street seems to be ignoring the very real possibility that the partnership with AWS could unlock many other deals for BlackBerry, greatly boosting BB stock in the process. Indeed, Omotosho, the Seeking Alpha columnist, is bearish on the company’s outlook when it comes to cloud security. But by partnering with the world’s leading cloud security vendor, AWS, BlackBerry will likely learn how to greatly enhance its cloud security offerings and be able to make many lucrative deals in the space.
Similarly, I believe the Street is greatly underestimating the extent to which BlackBerry’s recently expanded deal with Chinese tech heavyweight Baidu (NASDAQ:BIDU) will lead to other deals for BlackBerry within the gigantic Chinese market.
Underestimating the Strength of BlackBerry’s IT Security Offerings
Omotosho says that BlackBerry’s security products lack “momentum” and “coherence.” But many government agencies and large banks have adopted BlackBerry’s security solutions, Among the government departments that have chosen BlackBerry are an anti-tax fraud agency in one of the world’s eight largest economies, an EU agency that “provides IT services to political leadership at every level,” as well as many U.S. federal departments, according to the Toronto Star.
The large banks that utilize BlackBerry for IT security include Citi (NYSE:C), UBS (NYSE:UBS), Fifth Third Bancorp (NASDAQ:FITB) and the National Bank of Saudi Arabia.
I seriously doubt whether all these major government agencies and large banks would utilize BlackBerry’s security offerings unless they were one of the best, if not the best, solutions available.
Excessively Looking Backwards
Another Seeking Alpha author, Gio Danisi, focused on the idea that the sales of BlackBerry’s core software IoT business is poised to fall 23% since fiscal 2018, excluding the impact of Cylance, an IT security company that it acquired in 2019.
Without a doubt, BlackBerry has faced many more challenges than I had anticipated over the last several years, including the novel-coronavirus pandemic, a COO who apparently did not work out as planned, difficulties integrating Cylance, very determined short sellers, trouble with its sales team and the much slower-than-expected development of self-driving vehicles.
Nonetheless, these problems are largely behind BlackBerry, and the company has many strong, positive catalysts, including its partnerships, its current strong IT security products, its ability to sell software and services through connected vehicles, and its likely upcoming big payday from Facebook. (I discussed the latter two points in my previous column).
Therefore, I strongly believe that the best days of BlackBerry stock are still ahead of it.
The Bottom Line on BlackBerry Stock
Given BlackBerry’s powerful, upcoming catalysts and its relatively low valuation compared to a number of its competitors, including Crowdstrike (NASDAQ:CRWD) and Palo Alto (NYSE:PANW), I remain very bullish on the long-term outlook of BB stock.
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.
