BlackBerry (NYSE:BB) stock has been unfairly lumped in with “meme” stocks, but that’s not a total shock.
People on the Street and in the financial media tend to put rapidly rallying equities into one of two categories: so-called meme stocks and stocks that are surging because of purchases by institutional investors.
I believe some equities can be appealing to both retail investors and large institutions.
BlackBerry’s strong fundamentals, a recent upgrade by a prominent research firm, and the longstanding interest by a number of large institutional investors make me think BB stock is in the second category.
In the last 17 months, the number of hacking attacks seems to have surged. That’s a positive for BlackBerry, whose bread-and-butter these days is its strong IT security offerings.
In 2020, the SolarWinds hack affected U.S. government agencies as well as much of the nation’s supply chain. Other large enterprises hacked last year included Twitter (NYSE:TWTR), U.S. law enforcement agencies, and Garmin (NASDAQ:GRMN).
Already in 2021, “at least 30,000 U.S. organizations” were hit by hacks enabled by “newly-discovered flaws in Microsoft Exchange Server email software,” KrebsonSecurity reported.
BlackBerry has strong IT security credentials, including Zero-Trust architecture, the experience of protecting more than 500 million endpoints, and AI-enhanced security. The company’s Unified Endpoint Security for Vehicles was an Automotive Gold Winner in the 2021 Cybersecurity Excellence Awards this year.
In 2019, its Cylance unit won Cybersecurity Excellence Awards in five categories.
Many large automakers and hardware developers, including Ford (NYSE:F), Volvo, Denso (OTC:DNZOY) and Baidu (NASDAQ:BIDU) are utilizing BlackBerry’s systems in their vehicles because of the Canadian company’s strong IT security credentials.
BlackBerry recently unveiled Gateway, a network security product that, in addition to utilizing AI and Zero Trust Network Access, allows remote employees to securely connect with their companies’ networks from any location.
Further, the automotive app store that BlackBerry is developing in partnership with Amazon (NASDAQ:AMZN) should move the needle for BB stock.
I believe that the company is poised to soon sell some of its patents to Facebook (NASDAQ:FB) for a great deal of money. I think that the recent rally of the company’s shares may have been triggered by anticipation of that upcoming payment by institutional investors.
Good News for BlackBerry Stock
On March 31, Canaccord Genuity raised its rating on BlackBerry to “hold” from “sell,” saying that the company is turning the corner toward stronger trends and has created a cogent long-term strategy.
As of March 31, investment manager Primecap Management controlled $371 million of the company’s shares, while Canadian institutional investor Fairfax owned $394 million of BB stock. Finally, German insurance giant Allianz had $231.5 million of BlackBerry’s shares.
Institutional investors owned more than 42% of the shares of BB stock. Conversely, institutions held only 23% of the shares of AMC (NYSE:AMC) last March, less than 13% of the shares of Ocugen (NASDAQ:OCGN) stock and 7.5% of Koss’ (NASDAQ:KOSS) shares.
I consider those three companies to be among the weakest of the “meme” names.
The Bottom Line on BB Stock
I believe that both retail investors and institutional investors sparked the recent rally in BB stock. As a result of that situation, the company’s strong fundamentals and its reasonable valuation, I expect the shares to climb significantly in the next six months.
On the date of publication, Larry Ramer held a long position in BlackBerry and a short position in Ocugen. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
