BlackBerry will need more than its iconic name to impress investors
Blackberry (New York Stock Exchange: BB) shares tumbled the day after reporting mixed earnings. The company outperformed non-GAAP earnings and surprised with a positive 6 cents per share compared to the negative cent per share expected by analysts.
And the loss of income was not terrible. The real problem for the company was its forward orientation. In 2021, the company received a considerable amount of revenue from the sale of patent licenses from its legacy mobile device business. That revenue has mostly been accounted for and that means going forward the company will have to rely on the other business units to pick up the slack.
Therein lies the problem.
BlackBerry posted $749 million in revenue in 2021. That was less than the year before. And next year, management expects $705 million on the high end. That makes math difficult.
Going forward, the company will earn its revenue primarily through its cybersecurity products and IoT products. At its core, BlackBerry has always been focused on cybersecurity. However, on the company’s earnings call, it said it expects revenue from the cyber sector to remain flat in 2022.
Meaningful income is years away
That leaves the company’s IoT solutions. And that brings us to IVY, the company’s scalable cloud-connected software program. IVY is an acronym for Intelligent Vehicle Data Platform. It has the potential to provide electric vehicle manufacturers with a universal solution that allows them to safely and consistently collect data from multiple sensors.
BlackBerry touts IVY as a win-win for consumers and electric vehicle manufacturers. Consumers will get an enhanced driving experience. And manufacturers will benefit from lower costs, more efficient operations and higher revenues. This will be particularly true with autonomous vehicles. And BlackBerry has partnerships with Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ:AMZN). However, that future is years away.
BB Stock is a story for another day
On two separate occasions in 2021, BB stock was caught up in the movement of meme stocks. It seemed like an odd edit for this stock band. However, the company name denotes an iconic brand. Perhaps some retail investors got lost in nostalgia.
And the action was cheap. A recognizable name and a cheap price went a long way. I wrote about BlackBerry several times in 2021 and always warned investors that meme stock mania could distract them from what was really going on with BlackBerry.
I find myself supporting BlackBerry. It is a company that has always had its roots in security. And it may have a role to play in cybersecurity. It may also have a role to play in autonomous vehicles.
The problem I have with BlackBerry is that the company depends on too many factors that are out of their control. Right now, that includes semiconductor chips, supply chain difficulties and automotive production schedules. And that makes it hard to see a reason to buy stocks right now.
Is there a long-term story here? I still think there may be. But at this point, the company is projecting full-year revenue to be lower than it was in 2021. And that will put pressure on an already high valuation. In short, BlackBerry is not a meme stock, sadly not a buy at the moment either.