A few of you would possibly know Blackberry Ltd. (TSX:BB) from the times when it was the chief within the handheld cellphone market. Others would possibly know Blackberry from the 2023 film that instructed the story of its rise and fall. No matter you realize it from, I imagine Blackberry inventory is value contemplating, because it’s grossly underappreciated and undervalued .
Please learn on as I’m going over why I believe it’s a prime inventory to purchase underneath $10.
Blackberry rising from the ashes
It’s no secret that Blackberry’s inventory value efficiency has been disastrous for greater than 20 years. Actually, the inventory has languished beneath $10 for a lot of that point. It was a speedy and stunning fall from grace that noticed Blackberry fall from the highest place within the handheld cellphone market. However as Blackberry accepted that it misplaced its place because the chief in handheld telephones, it started to embark on utterly remodeling its enterprise.
Different firms would have thrown within the towel, referred to as it a day, and closed up store after that spectacular fall from grace. However Blackberry shifted gears and in the end deserted the hand-held cellphone enterprise. As a substitute, the corporate targeted its strengths and developed its web of issues (IoT) and cybersecurity companies.
The brand new Blackberry
At the moment, Blackberry has as soon as once more remodeled, letting go of its underperforming Cylance phase to give attention to its QNX phase (previously IoT). The QNX enterprise is Blackberry’s machine-to-machine connectivity enterprise – the engine of development.
The corporate’s QNX working system permits compute-intensive platforms like autonomous driving programs, and industrial robots. It’s trusted throughout quite a lot of industries similar to automotive, medical gadgets, industrial controls, robotics, aerospace, and defence.
The renewed give attention to the QNX enterprise supplies clear advantages. Firstly, Blackberry is benefitting from the money acquired from the sale of its Cylance enterprise. The $160 million acquired strengthened Blackberry’s monetary place and permits the corporate to ramp up funding within the higher-growth QNX enterprise.
Outcomes spotlight the potential
In its most up-to-date quarter, Blackberry reported that the QNX backlog was $865 million. This compares to fiscal 2025 income of $535 million. This sturdy backlog highlights the demand that Blackberry is seeing in its QNX enterprise, significantly within the automotive business. Actually, the linked automobile market is rising exponentially. That is being pushed by client demand for fixed connectivity in addition to security and safety targets.
As for Blackberry’s most up-to-date outcomes, adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) got here in at $21.1 million. This represents a 15% margin and got here in above expectations. Additionally, Blackberry’s working money stream got here in at $57 million. This was additionally above expectations and it compares very favourably to prior years of losses.
Lastly, the corporate just lately introduced a share buyback program, to purchase as much as 4.7% of excellent float. Administration believes that Blackberry’s inventory value typically trades at undervalued ranges. The buyback will generate a gorgeous return of capital at these occasions. This demonstrates that administration expects continued sturdy working money stream this 12 months and continued steadiness sheet strengthening. This, together with its sturdy money place of $337 million, is a optimistic sign that it’s a inventory to purchase proper now.
