Blackberry Stock Predictions: BlackBerry Should Drop Devices, Shift Focus To The Future

Blackberry Stock Predictions

BlackBerry Ltd. (NASDAQ: BBRY) is a Canadian telecommunications and wireless equipment company. Best known for its BlackBerry smartphones, the company is trying to revive its smartphone business with new models that include top of the line security features and the physical keyboard. This strategy has been unsuccessful so far this year, as the stock price has fallen nearly 16% year-to-date. Now, the company has announced that it will release a phone using the Android operating system instead of its own.

While CEO John Chen continues to assert that the company will be able to regain market share in the smartphone market, what the company should really be focusing on is the Internet of Things market, which is going to grow at a rapid pace over the next 5 years. With its impressive security offerings, BlackBerry can be an influential player in this massive market. In addition, the company could perform better without making smartphones, which is most likely its best strategy going forward.

Blackberry Stock Predictions

Figure 1. Source: YCharts

What The Android Powered Devices Mean

A report from Reuters last week indicated that BlackBerry was ready to use the Android operating system for one of its devices, instead of using its own BlackBerry 10 operating system. BlackBerry’s phones running on this operating system have been received well critically, but have been unable to compete with offerings using operating systems of rivals Apple (NASDAQ: AAPL) and Google’s (NASDAQ: GOOG) Android. This is in large part due to the lack of major apps on these devices.

By partnering with Samsung (OTC: SSNLF), BlackBerry can get its smartphones into the hands of users. Its current market share has fallen to well below 1% of the total smart phone market, while Android has roughly 78% of this market according to the International Data Corporation. While using the Android operating system could conceivably get more devices into the market, this technique is unlikely to work, and BlackBerry would be wiser to drop its hardware business and focus solely on software.

It has already started this trend, as it has made much of its patented offerings compatible with any device running iOS, Android, or Windows. These offerings include its security tools, which are still viewed as top of the market. By introducing a phone for Android, the company will prove that its new device management system BES12 can work across different operating systems, increasing its software sales.

Blackberry Stock Predictions

Figure 2. Source: BlackBerryCentral.com

Offering its software products for other devices is the company’s best path forward. BlackBerry currently has 44,000 patents, and by exiting the hardware business, it would be able to better monetize these patents. This would offer the company more revenue than its hardware business currently offers with its miniscule market share, as it would be able to charge other operating systems for using its patents without recourse for using other companies’ intellectual property.

This strategy would also allow BlackBerry to focus more of its resources on its software and other offerings. While Chen and others at BlackBerry have maintained that they are committed to the BlackBerry 10 line of smart phones, the company has been cutting back on its hardware devices workforce, as it has cut over 11,000 jobs in this segment of the company since the headcount peaked in 2011. Last month, BlackBerry announced that it would make further job cuts for the devices segment, indicating that the company could eventually leave this market altogether.

Increase Focus On Internet of Things

Exiting the devices business would improve the company’s performance in the near-term and would allow BlackBerry to focus on its software offerings. More importantly, it would eliminate costs freeing up resources for the company to focus more on the Internet of Things (IoT), where the company hopes to play a major role going forward. This market will grow rapidly over the next five years, with the number of connected devices expected to grow from 5 billion to 25 billion by 2020 according to at least one forecast.

Chen announced Project Ion last year as a series of initiatives to allow BlackBerry to take advantage of this rapidly growing market. The amount of devices that will eventually be connected far outweigh the potential smartphone market, and BlackBerry already has much of what is needed to be a successful player in this market. Its QNX embedded systems software is already used in cars and industrial applications.

Blackberry Stock Predictions

Figure 3. Source: BlackBerry.com

This is a good place for the company to start, as they are among the first to join the IoT trend. By already being entered into the market, BlackBerry can gain experience and the necessary knowledge to be able to expand its data processing rapidly as the amount of connected devices increases. Most importantly, BlackBerry’s security offerings in other fields will give it a good reputation with these enterprises and customers with its solid track record in the mobile field.

Security for the IoT market is one of the main concerns with the rapidly growing market, as an unsecure chink in the system, such as a television that is connected, could allow hackers to get into a system and get sensitive information. In April, BlackBerry unveiled the Center for High Assurance Computing Excellence (CHACE). This will establish the company as the standard for security in this field, making sure it plays a major role in the market as a secure organizer of all the information.

Algorithmic Analysis

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. The self-learning algorithm uses artificial intelligence, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets.

The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.

I Know First has had success predicting the movement of BlackBerry’s stock price in the past. In this three-month forecast, BlackBerry had a strong bearish signal of 40.57 and a predictability of 0.47. In accordance with the algorithm’s prediction, the stock price fell 5.61% during the predicted time horizon.

Blackberry Stock Predictions

Having explained how I Know First’s algorithm works, it is worthwhile to see if the algorithm agrees with the bullish fundamental analysis of the company. The one-month and three-month forecasts for the stock are included.

Blackberry Stock Predictions

BlackBerry is bullish according to the algorithm for both time horizons. The signal strength for the three-month time horizon is not as strong as that for the 1-month time horizon. The predictabilities are very impressive, indicating that the algorithm has had success predicting the movement of the stock price in the past. This algorithmic analysis is in accordance with the fundamental analysis of the company.

Conclusion

By exiting the devices business and focusing on its software offerings and the IoT market, BlackBerry’s current price becomes rather attractive. Its market cap is currently under $4.93 billion. At this price, all the investor is paying for is the company’s cash, patents, and its software offerings such as BlackBerry Messenger. This does not take into account the tremendous upside potential included with its current outlook in the IoT market. This stock is a solid buy at this point of time, especially if it exits the devices market. At current prices, the stock is an attractive option for incredible growth going forward.