BlackBerry (NYSE:BB) has a history of finding itself in headlines. Often it has been for the wrong reasons, especially back when it was known as Research in Motion. That iteration of BlackBerry infamously threw away a leadership position in smartphones by refusing to adopt a touchscreen display. It then did a face plant with tablets. Today’s BlackBerry is a very different company. It has been in headlines again in 2021 — this time as a meme stock — and shares are currently trading at the $10 level after topping $25 in January. Is it time to add BB stock to your portfolio?
As part of making that decision, it’s worth looking at what you’d actually be investing in if you bought BB stock. There are still BlackBerry phones on the market, although they’re not manufactured by BlackBerry and they run Android. However, today’s BlackBerry is a company that’s focused on anything but smartphones. Here’s what you need to know about the Canadian tech pioneer’s current business.
There are a half-dozen or so BlackBerry smartphones currently on the market. Some even have physical keyboards! However, BlackBerry OS is dead — these run Android. And they’re made under license by a third party manufacturer. Licensing revenue for Q1 fiscal 2022 was $24 million, or 14% of BlackBerry’s revenue for the quarter.
So BlackBerry still makes money from selling smartphones, but the days when this would be enough to move the BB stock ticker are long gone.
Buying QNX in 2010 was one of the smartest things this company ever did. The move turned BlackBerry into a big player in the auto infotainment world. The company says that there are now 195 million vehicles equipped with embedded QNX software. In Q1, the royalty revenue backlog for QNX stood at $490 million. This is big business for BlackBerry.
The company has also been working on QNX-powered autonomous car software. This is becoming a crowded space, but the payoff should BlackBerry succeed — and be able to sell QNX autonomous solutions to auto makers who give up on their own solutions — would be considerable.
Cybersecurity Drives BlackBerry Now
A big part of BlackBerry’s pivot has involved leveraging its reputation for secure communications, that began with BlackBerry Messenger. That move has seen the company push heavily into enterprise security. In the most recent quarter, cybersecurity generated $107 million in revenue — 61% of the total. When you look at what is currently driving BB stock value, it’s cybersecurity.
The recently announced BlackBerry Gateway is designed to be a highly secure, cloud-based solution for remote workers. With more companies adopting a hybrid work approach as a result of the pandemic. BlackBerry Gateway is likely to see many enterprise customers.
The Internet of Things (IoT) is rapidly expanding into a huge market. Security is a critical issue with the billions of connected devices and BlackBerry has identified this market as a big opportunity.
The company’s IoT division focuses on securing connected devices for enterprise and government clients. IoT generated $43 million in revenue for the quarter (25% of total revenue), and did so with an impressive 84% gross margin.
Bottom Line on BB Stock
As InvestorPlace contributor Will Ashworth points out, one of the concerns about BlackBerry is its profitability. More precisely, the lack thereof. Despite its pivots, the company is still struggling on that front. In 2021, it lost $1.10 billion on a GAAP basis, a performance far worse than in 2020. To be fair, the pandemic and its disruption of many enterprise and government IT projects didn’t help there.
The company’s financial performance and meme stock status are weighing on investment analysts. Those tracked by CNN Money have BB stock rated as a “sell” with an $8.50 price target.
However, you are looking at BB stock as a long-term investment. And in this case, the equation changes. The company’s bets on areas like security for remote workers and the Internet of Things have considerable potential to pay off with time. In addition, BB stock currently scores an overall ‘B’ rating in Portfolio Grader.
Should it be in your portfolio? The long-term growth potential is there. The question is how much the waters have been muddied by BlackBerry’s meme stock status. If you buy now, analysts feel there’s a good chance your investment will lose value over the next 12 months as a correction continues. If you are comfortable with that possibility, BB stock remains well below levels it hit throughout 2017 and 2018. It has room to move. Its focus on security — including remote workforces and the IoT — position BlackBerry to defy the analysts, especially if you think beyond 12 months.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.