Is BlackBerry a BUY or SELL After Announcing a Partnership with Amazon?

One of the most dramatic stock performances this week occurred on Tuesday with the announcement that BlackBerry Ltd. (BB) signed a multi-year global agreement with Amazon (AMZN) to create a new cloud-connected intelligent vehicle data platform called IVY. BB shares recorded their greatest spike in five years, with trading volume at more than 70 times its daily average. 

For investors that already had BB shares, this abrupt ascension came as a welcome surprise. But this week’s rally raises the question of whether the usually sleepy BB stock can continue to display this newfound vibrancy.

For those not paying recent attention to the company, the mention of BB would probably recall its mobile phones from the previous decade and how it lost its leadership role in that sector to the likes of Apple. Today, the Waterloo, Ontario-headquartered company focuses its effort on software and security products and services – not the bright shiny object of a mobile phone, but technologies that quietly reshape the digital world. 

BB is heavily focused on the automotive technology space and the IVY platform could become a game changer. According to a press statement issued by BB and AMZN to announce their partnership, IVY is designed to apply machine learning to “generate predictive insights and inferences, making it possible for automakers to offer in-vehicle experiences that are highly personalized and able to take action based on those insights. BlackBerry IVY will support multiple vehicle operating systems and multi-cloud deployments in order to ensure compatibility across vehicle models and brands.”

The AMZN announcement generated much more attention than a partnership BB announced in August on co-developing the autonomous driving domain controller for the latest electric vehicle manufactured by China’s Xpeng Motors (XPEV). In June, BB reported that its QNX automotive software is now embedded in more than 175 million cars, an increase of 25 million cars from one year earlier.

On the financial side, BB’s performance has been respectable, if not exactly flashy. In the August announcement of its earnings report for Q2 Fiscal 2021, it recorded non-GAAP revenue of C$266 million – one year earlier, the figure was C$261 million. It also acknowledged that 90% of its software product revenue to be recurring.

During the company’s Q2, CEO John Chen reeled off a list of clients using the BlackBerry Spark security and management solution: The U.S. Air Force, the U.K. Ministry of Defense, the Royal Canadian Mint, Banco de México, the New Zealand Ministry of Foreign Trade, Rolls Royce, Lloyds Bank, Societe Generale and Mitsubishi. Not a shabby list, by any stretch, yet BB’s teamwork with those entities never generated the attention of the AMZN deal.

Indeed, before Tuesday many investors viewed the stock as a bit of a snoozer, despite the company’s vibrant Q2. In the weeks prior to the AMZN announcement, it was mostly trading in the four- and five-dollar-plus-change range. 

(Source: TradingView.com)

Our proprietary POWR ratings system gives BB an “A” for Trade Grade and a “B” for Industry Rank, with an overall “Buy” recommendation. Within the Telecom – Domestic category, BB ranks #9 out of 25 stocks.

How should investors view BB now after the euphoria of the AMZN deal has subsided? Scoring another AMZN-level deal may not be immediately likely, but at least this week gave investors a wake-up call to what BB is accomplishing. At this point, BB should be considered a Buy, and the savvy investor should pay more attention to BB’s high-tech breakthroughs and the company it is keeping.  

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BB shares were trading at $8.25 per share on Friday afternoon, up $0.79 (+10.59%). Year-to-date, BB has gained 28.50%, versus a 16.27% rise in the benchmark S&P 500 index during the same period.

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output.

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