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Stock of the Week: BlackBerry

Why this reformed meme stock is now undervalued.

Andrew Willis 25 July, 2022 | 4:48AM
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Andrew Willis: Many meme stock investors last year were looking to leverage the established BlackBerry (BB) brand that’s now part of a portfolio of licensing deals. But licensing sales have been suspended as the company works to sell its patent portfolio. Now, we see a new side to BlackBerry that may interest all investors.

BlackBerry’s new Internet of Things business, which includes applications in autonomous vehicles, is up 19%, with a backlog of future sales. Some investors may be betting on an inflection point where BlackBerry’s flagship enterprise cybersecurity offering takes on the likes of Microsoft or VMWare – but as equity analyst William Kerwin explains, these companies are entrenched and BlackBerry can’t match their switching costs. In fact, one of BlackBerry’s selling points, ‘a centralized solution for all devices’, presents a low switching cost in and of itself. Considering competitor software requires longer implementation times and intertwines with more companywide operating procedures, it’s hard to award BlackBerry an economic moat.

As BlackBerry’s stock price has fallen below the expectations of speculators, long-term investors may see the opportunity that’s behind the scenes in autonomous vehicles with embedded software. We think the firm’s greatest growth opportunities will come from connected and autonomous vehicles with the QNX software business – even though they’re being too nice on the switching costs there as well.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BlackBerry Ltd5.97 CAD-0.17Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @AndrewWillisCDN.

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