Canadian tech company BlackBerry (TSX:BB)(NYSE:BB) has been trading sideways in recent months, sitting well below the $18 highs it reached in July. Still, the stock is up roughly 160% this year, putting it on track for its strongest annual performance in over two decades. With December earnings around the corner, investors may be wondering if it can surge again, perhaps reaching $20.
Behind the rally is a noticeably stronger business. In its most recent quarter, revenue climbed 26%, driven by 27% growth in its QNX segment, which is gaining attention for its potential applications in physical artificial intelligence. Combined with gross margins of around 80% and six consecutive quarters of positive net income, BlackBerry is delivering a solid mix of rapid growth and profitability. For the full fiscal year, management expects between $616 million and $636 million in revenue, up from $549 million last year.
The main hurdle, however, is valuation. Trading at more than 70 times trailing earnings and 37 times forward earnings, BlackBerry carries a steep premium compared to the S&P 500’s forward multiple of 19. When expectations are that high, even a solid quarter may not be enough to spark a major rally unless guidance significantly beats forecasts.
Macroeconomic headwinds also pose a risk. Rising interest rates in Canada and the U.S. could curb corporate software spending, and the upcoming Federal Reserve meeting on December 9 could weigh on the broader tech sector.
While hitting $20 isn’t impossible if BlackBerry blows past expectations, waiting until after next month’s earnings and Fed decision may be a safer option for investors than buying right now.
Tech Insider
