BlackBerry Stock Prediction: BlackBerry Is Flourishing As A Security-Focused Software Company
The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.
BlackBerry Stock Prediction
Summary:
- My last buy recommendation for BlackBerry was last July 21. After dipping below $9 in August, the stock is again trading above $11.
- BlackBerry posted a beat on revenue and EPS estimates last September 28. Consequently, investors pushed its stock to as high as $11.34.
- BlackBerry is clearly flourishing as a security-focused software provider. There is hope yet for this fallen angel.
- Chen failed to turnaround BlackBerry’s phone hardware business but he is succeeding in his new software-centric strategy.
- BBRY has positive near and long-term algorithmic forecasts from I Know First. There’s probability that BBRY can post a new 52-week high before 2017 ends.
My last buy recommendation for BlackBerry (BBRY) was last July 21. If you took that advice promptly, you would have gained at least 9% in capital gains. Yes, BBRY dipped below $9 prior to its Q2 earnings report. However, it shot up above $11 again after BlackBerry reported a beat on EPS and revenue estimates. It is now again trading near its old 52-week high of $11.74.
The positive market reaction to BlackBerry’s impressive Q2 post-earnings report is why BBRY now has a 30-day return of +20.7%. I firmly believe that BBRY still has upside potential. BlackBerry is now a profitable software company and it deserves a higher P/E (currently only 11.19x).
(Source: Morningstar.com)
My optimism over BlackBerry is because it is no longer handicapped by an unprofitable phone hardware business. Selling or renting software products to enterprise and government customers is a low-overhead venture. BlackBerry already posted positive EPS for four consecutive quarters. BBRY has also beat EPS estimates for eight consecutive quarters.
Based on historical performance, there’s a very high probability that BlackBerry will remain profitable for the next eight quarters. If my prediction proves true, BBRY could hit $18 in two years’ time. I emphasize that BlackBerry is now free of its unprofitable phone hardware business. It is therefore primed to rise faster as a software company with a P/E valuation comparable to leading software companies like Microsoft (MSFT). MSFT’s P/E ratio is 27.58.
Flourishing As A Security-Focused Software Vendor
Yes, John Chen failed to turnaround BlackBerry’s phone hardware business. However, BlackBerry’s four consecutive quarters of positive EPS is prima facie evidence that Chen’s software-centric strategy is working. While it is not the ideal scenario projected three years ago, Chen has indeed transformed BlackBerry into a viable company again.
By going software-only (TCL communications is now the licensed builder of BlackBerry phones), BlackBerry can focus on improving its security-focused software products. I am very bullish about BlackBerry’s Unified Endpoint Management [UEM] enterprise software package. UEM is a must-have software product works on continuously securing different devices, computers, and Internet of Things gadgets.
Now that personal health data is being stored and shared through smartbands, watches, and phones, BlackBerry can flourish as a vendor of security software that will preserve the sanctity of that personal data. Google (GOOG), Samsung (SSNLF), and Apple (AAPL) have their own layer of security. However, no company on the planet today can match the decades-old track-record of BlackBerry when it comes to software security. BlackBerry Secure’s spider web of applications is why you should go long BBRY.
(Source: BlackBerry)
BlackBerry’s sole motto now is to secure the end-to-end devices of enterprise and personal computing. It wants to monetize as a go-to provider of device-agnostic and cross-platform security suite. It has the products to service all types of customers, be it small or large.
(Source: BlackBerry)
To forecast the future value of BBRY, one must take into account on how much it will earn securing billions of devices in the future. Three years from now, BlackBerry could earn $500 million per quarter just from software subscription. We must now evaluate BlackBerry as a growth company that is just kick starting its momentum. It still has a long way to go before it can reach maximum velocity.
Conclusion
As long as BlackBerry owns the Certicom patents, it will remain the leader in software security and data encryption. Secrets-laden government agencies and enterprise clients will remain captured customers of BlackBerry. The only thing that Chen should focus on now is to win more small business to subscribe to BlackBerry UEM and BlackBerry Cybersecurity Services.
It is my fearless forecast that BlackBerry can improve its quarterly revenue by recruiting not only large enterprise customers, but also small to medium firms. To do this, BlackBerry can offer discounted software subscription plans to companies with less than 200 employees. Gaining the favor of small business could add $50 to $100 million more to BlackBerry’s quarterly revenue.
My buy rating for BBRY is backed by its positive near and long-term algorithmic market trend forecasts. I Know First is highly confident that BBRY is scheduled for more upside in the next 12 months. John Chen only needs to deliver four more consecutive quarters of positive EPS and BBRY could hit $15.
Lastly, hedge fund managers have a positive outlook for BBRY. More often than not, small retail investors can profit from shadowing the investing choices of hedge fund managers. If famed investor Theofanis Kolokotrones (Chairman of PRIMECAP Funds) can bet $757 million on BBRY, buying 757 or 7,570 shares is justifiable.
Past I Know First Success With BBRY
I Know First’s algorithm has made accurate predictions on BBRY in the past, such as its bearish article published on December 26th, 2016. In the article, it explains that BlackBerry’s stock currently touts sell signals from the algorithmic forecasts of I Know First. The 3-month algorithmic forecast of Blackberry is quite weak to the downside. In the 3-month prediction from December 20th, 2016 to March 20th, 2017, BBRY shares decreased by 6.6% in line with the I Know First algorithm’s forecast. See chart below.
This bearish forecast for BBRY was sent to I Know First subscribers on December 20th, 2016. To subscribe today click here.
I Know First Heatmap Explanation
The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.
Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.
