BlackBerry (NYSE:BB) has ridden on the wave of hype from popular Reddit forum r/WallStreetBets twice now. First in February, where BB stock reached a high of $26 and in June, where it rose to $18. While having public exposure is always a good thing, the company was unfortunately relegated to meme stock status.
Combine this meme stock label with BlackBerry’s history as a failed smartphone manufacturer. This has resulted in BlackBerry is an underappreciated company. As BB stock continues on its consolidation pattern, I wanted to take the opportunity to reiterate the bullish case for BlackBerry.
Wall Street Remains Bearish
The turn-around at BlackBerry is taking longer than investors anticipated creating a bearish overhang for BB stock. After reaching a high of $18 in June, BB stock fell as Wall Street cited valuation concerns. This was in combination with BlackBerry missing Wall Street’s earnings estimates. In first-quarter 2022 BlackBerry posted $174 million in revenue compared to analyst expectations of $178 million. Q1 2022 revenue also declined by 16% year-over-year. Note: BlackBerry has a different fiscal year, Q1 2022 fiscal ended May 2021.
According to TipRanks, Wall Street analysts have given BB stock an average price target of $9.50. This was based on the price targets of four analysts. The range of the price targets is a high of $11.00 and a low of $7.50. The stock has a moderate sell rating.
The overall bearish sentiment from Wall Street analysts is a good thing though for patient investors of BlackBerry. This sentiment represents the “wall of worry ” BB stock has to climb before it reaches new highs. As the company continues to execute its turnaround plans, investor confidence will build up pushing the stock once again to its highs.
Company CEO John Chen had asked for investor’s patience when discussing the technology firm’s turnaround. In a Bloomberg article, Chen was quoted saying “Our main focus is growing the top line, and therefore we’ve been seeing increased investments in both our software business units, as we see double digit early growth this year.” The company expects to grow its salesforce by 23% by the end of August.
BlackBerry Could See Rising Revenue
BlackBerry’s quarterly miss was largely driven by the slowdown in the QNX segment. BlackBerry’s QNX is software that is embedded in automobiles. Therefore sales are affected by the slowdown in the automobile industry. This slowdown is largely being driven by the global chip shortage. The shortage is causing supply-chain issues in the automobile market.
It should be noted though that most analysts believe that this chip shortage is a near-term issue that will be resolved shortly. The root cause of this, of course, is the COVID-19 pandemic which has disrupted major supply chains. As the world slowly returns back to normal, these supply chain difficulties will iron themselves out.
The company recently disclosed that its QNX systems are now embedded in over 195 million vehicles. This was an increase of 20 million from the previous year. BlackBerry is now the market leader in automobile safety-certified embedded software in partnerships with almost all of the major original equipment manufacturers (OEMs).
BlackBerry is continuing to expand its market presence in this space. It recently announced that QNX was chosen to power Great Wall Motors’ (OTCMKTS:GWLLF) next-generation SUV. This SUV is the flagship model for Great Wall Motors, giving BlackBerry access to the massive Chinese market.
Investor Takeaway on BB Stock
BlackBerry may be unloved by Wall Street but it actually holds plenty of promise. This bodes well for investors of BB stock. If the company can continue to expand in its markets, analysts could be surprised by the company’s revenues.
The QNX is increasingly becoming an integral piece of the automobile. Furthermore, recent partnerships with Chinese firms could unlock a massive market.
BB stock is more than a meme and is worthy of consideration.
On the date of publication, Joseph Nograles held a LONG position in BB. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.
