Analysts did not budge from their ‘hold’ call on BlackBerry (TSX:BB) stock despite the weak quarterly results. And with shares holding the $5.00 level since the report, speculators may start picking at the stock at these levels. BlackBerry traded at around $7.50 before results and could head towards that level in the next few months. What will it take for BB stock to hold $5 and add a few points from here?
The beaten-down firm reported revenue growing 24% in Q2. ARR (annual recurring revenue) grew 21% to $170 million. Cylance and the end-to-end security market is a potential growth area but faces heavy competition. Microsoft (NASDAQ:MSFT), VMware (NYSE:VMW), Citrix (NASDAQ:CTXS), and Crowdstrike (NASDAQ:CRWD) are big names in this market. Investors are doubtful that Cylance will gain any market share from here. The company needs to increase ad spend to grow Cylance subscriptions.
The ADAS (autonomous driving) market is another growth catalyst. The segment slowed in the last quarter but as car manufacturers increase the BlackBerry security solutions in each unit, revenue will improve.
Integrating Cylance slowed its growth progress but strengthened the product overall. Expect a longer sales cycle but higher revenue per subscriber. Getting Samsung onboard Cylance should give BlackBerry some recurring, predictable revenue.
The takeaway is that BlackBerry has plenty of upside potential. The stock trades at a discount. Its next step is reporting GAAP profits to win investor confidence.
