BlackBerry Stock: Still Sinking

After starting 2018 on a strong note and a rally from $11 to over $14 a share, BlackBerry Limited (TSX: BB) fell below $12 in February. The company is generating meaningful profit growth, pivoting away from smartphones and towards enterprise software and car automation secure solutions. Investors just need to wait a long time for the transformation to play out.

On Feb 2, CEO John Chen said BlackBerry’s top market targets are in health-care, oil and gas, and automotive. Just as Descartes Systems (NASDAQ: DSGX) targeted the delivery markets only, the former smartphone giant recognizes the market potential for secure communications among device units in IoT.

But getting revenue acceleration is a slow process. BlackBerry succeeded somewhat in growing the BlackBerry Enterprise Server software subscription signup, though it took several years before customer uptake accelerated. Still, the company still requires accelerated growth in enterprise software to fund its other ambitions. BlackBerry has $4.57/cash per share and plenty of patent revenue potential. That will give the company time to build its core business first before it relies primarily on new markets for sustained profit growth.

Fair value implies downside

The most optimistic valuation model for BlackBerry is the EBITDA Multiples Valuation