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BlackBerry (BB) is an Enticing Bet for Investors: Here's Why

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Shares of BlackBerry Limited (BB - Free Report) have gained 43.2% compared with the industry’s growth of 40.2% in the past year. The uptick was primarily driven by robust demand for cybersecurity and IoT products in the market. The company invests in product development and go-to-market strategy to drive long-term sustainable growth.

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BlackBerry is witnessing significant progress in the auto business despite headwinds related to the global chip shortage. The company leverages its extensive technology portfolio to offer best-in-class security, safety and reliability to enterprise customers in growing segments of the cybersecurity, connected transportation, financial services and government markets.

The stock pulled off a trailing four-quarter earnings surprise of 29.2%, on average. The Zacks Consensus Estimate for its current-year earnings has narrowed from a loss of 20 cents per share to a loss of 13 cents in the past 60 days, while estimates for its next-year earnings have narrowed from a loss of 9 cents per share to a loss of 8 cents. It currently carries a Zacks Rank #2 (Buy).

Growth Drivers

Headquartered in Waterloo, Ontario, Canada, BlackBerry is a leading player in enterprise mobility management. It is widely recognized for productivity and security innovations. The company offers one of the most secure mobile enterprise solutions in the market through a broad portfolio of products and services.

It also delivers an end-to-end software and services platform for the Enterprise of Things, which includes computers, vehicles, sensors and other connected endpoints that communicate with each other to enable smart business processes. Accretive design wins and partnerships with major players bode well for the Canada-based company.

The company’s goal is to remain a leader in regulated industries and other core verticals by continuing to extend the functionality of its secure BlackBerry Spark software platform through strategic acquisitions and partnerships. It intends to drive revenue growth and achieve margins that are consistent with other enterprise software companies.

BlackBerry has aligned its software and services business around two key market opportunities — Cyber Security and IoT. BlackBerry QNX is the market leader for safety-certified embedded software in automotive. The QNX software is embedded in more than 195 million vehicles globally. For IoT, the company aims to drive revenues and increase market share.

At the same time, BB intends to expand its footprint with BlackBerry Cylance while improving profitability and reducing the cash burn. For licensing, it is expected to benefit from the higher amount of recurring revenues. Also, the acquisition of Irvine, CA-based cybersecurity firm, Cylance, which has a highly skilled workforce and market-leading portfolio of endpoint solutions, is considered a strategic fit for Blackberry and complements its Unified Endpoint Management and QNX businesses. With a holistic growth model, it is focused on both organic and inorganic initiatives for expanding its market leadership. We believe that the stock has more upside potential left. Supported by such healthy business dynamics, BlackBerry appears to be an attractive option for investors at the moment.

Major Developments

BlackBerry was selected by Mahindra & Mahindra (“M&M”), a leading automotive company in India, to power a Cockpit Domain Controller (CDC). The CDC that leverages BlackBerry’s QNX Neutrino Real-time Operating System and QNX Hypervisor for Safety is now under mass production.

The CDC platform will power M&M’s new XUV700 SUV, which will provide a more intuitive and intelligent in-car driving experience to consumers of India. The deployment marked a significant automotive market expansion in India for BlackBerry.

It also extended its partnership with L-SPARK to boost the development of connected vehicle technology innovation for Canada-based technology companies. The entities are currently in the third phase of their joint accelerator program.

BlackBerry and L-SPARK, Canada’s largest software-as-a-service accelerator, will select up to six companies to participate in the third cohort of this collaborative project. They will seek the expertise of the National Research Council of Canada-Industrial Research Assistance Program to connect with companies that will gain from the BlackBerry QNX product group on the back of innovative technologies.

Furthermore, BlackBerry inked a multi-year agreement with BMW Group to develop next-gen technology to boost the latter’s vehicles. Per the deal, BlackBerry will assign a team of engineers to support the development of new SAE Level 2/2+ driving automation functions. The functions will be installed across multiple vehicle models. It will also license its QNX technology to BMW Group. It also announced a major update to its Guard managed detection and response service to deliver a managed extended detection and response service.

Other Stocks to Consider

salesforce.com, inc. (CRM - Free Report) sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its current-year earnings has been revised 6.4% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

salesforce.com delivered a trailing four-quarter earnings surprise of 44.2%, on average. It has returned 14.8% in the past year. CRM has a long-term earnings growth expectation of 16.8%.

ANSYS, Inc. (ANSS - Free Report) is another solid pick for investors, carrying a Zacks Rank #2. The consensus estimate for current-year earnings has been revised 2.4% upward over the past 60 days.

ANSYS delivered a trailing four-quarter earnings surprise of 22.7%, on average. It has gained 11.5% in the past year. ANSS has a long-term earnings growth expectation of 11.9%.

Microsoft Corporation (MSFT - Free Report) also carries a Zacks Rank #2. The consensus estimate for current-year earnings has been revised 0.1% upward over the past 30 days.

Microsoft delivered a trailing four-quarter earnings surprise of 14.8%, on average. It has surged 52.5% in the past year. MSFT has a long-term earnings growth expectation of 12%.


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