Company Reports

We think BlackBerry has positioned itself in rapidly growing markets that benefit from secular trends toward security and connectivity, but we think it has a long way to go to earn a durable competitive advantage. We like the firm’s automotive software portfolio, but see the larger enterprise security business as an underperformer that weighs on results. BlackBerry sells software into enterprise cybersecurity applications and embedded applications like cars. Its products in enterprise security focus on endpoint security. In the automotive market, BlackBerry’s QNX software underpins automotive chips, safety systems, and cabin features.

We lower our fair value estimate for no-moat BlackBerry to $4.40 per share from $4.90 as we moderate our long-term growth forecast. BlackBerry’s ongoing struggles in its cybersecurity business have weighed on results for the past three years, and we expect underperformance to continue. While we materially lower our security revenue forecast, we also have better confidence in BlackBerry’s execution of its cost savings strategy, which should help profitability. BlackBerry’s fourth-quarter results were positive, but weak security sales guidance for fiscal 2025 aligns with our expectation that this segment will continue to struggle. Shares rose about 6% after-hours, in our view, due to a good quarter and good progress on cost savings. Though shares trade below our fair value estimate, we would point investors to moaty software names under our coverage.

We maintain our $4.90 fair value estimate for no-moat BlackBerry after the firm provided a midquarter restructuring update and reaffirmed its fiscal fourth-quarter guidance. BlackBerry's ongoing separation of its business into two distinct internal organizations is being accompanied by cost-cutting in the form of office closures and layoffs to improve firmwide profitability. This is particularly concentrated in the cybersecurity business, and we see these changes as the first impact on the company by its new CEO, John Giamatteo. We like the focus on cash flow and profitability for a company that has been losing money since 2019. Still, our long-term thesis and no-moat rating on BlackBerry are unchanged. We continue to see the firm's cyber business as an underperformer, even with streamlined expenses, and hold a favorable view of the Internet of Things business. We think BlackBerry may try to spin off the cyber business in a couple of years when it holds a better profit profile. We see shares as undervalued but emphasize our Very High Uncertainty Rating and would recommend moatier companies under our coverage to investors.

We maintain our $4.90 fair value estimate for shares of no-moat BlackBerry after the firm reported fiscal third-quarter results. Results were positive, but guidance for the fiscal fourth quarter missed our expectations. Still, we attribute most of the guidance miss to lumpy deals getting pushed out in the short term. Newly appointed CEO John Giamatteo reiterated the upcoming split of its Internet of Things, or IoT, and cybersecurity divisions, along with that cost-cutting measures taken during the quarter will continue the firm’s march to consistent profitability and positive cash flow. Overall, we maintain our view that BlackBerry’s IoT segment is attractive and poised well for the long term, but we hold concerns over the turnaround for the cyber business. We see shares as slightly undervalued but would point investors to moatier and more undervalued software names within our coverage.

We maintain our $4.90 fair value estimate for shares of no-moat BlackBerry after the firm announced the appointment of John Giamatteo as CEO. The firm also announced a change in its strategic review: BlackBerry will no longer pursue an IPO for a portion of its Internet of Things division and will instead keep IoT and cybersecurity under one umbrella, but completely separate them into two completely independent divisions internally. We don’t foresee a meaningful inflection in the business from either move. We’re disappointed about the IPO for the IoT business being scrapped, given it is the superior business of the two in our view and would’ve been attractive for investors. Giamatteo has been leading BlackBerry’s cybersecurity business for 2 years and that business has lagged its market and peer group. We see shares as fairly valued.

No-moat BlackBerry announced its intention to separate into two distinct businesses on Oct. 4, and we maintain our $4.90 fair value estimate for the combined firm. We are pleased with the announcement, which would bifurcate the Internet of Things and cybersecurity businesses. We believe BlackBerry’s IoT business is the highest-value portion of the firm, and investors will find it an attractive investment as a stand-alone software stock. Meanwhile, the enterprise cybersecurity business has been struggling for some time, in part due to problems with its go-to-market approach, in our view. Still, we think both businesses can find better execution and valuation as separate entities. We see shares as fairly valued, even after trading slightly higher afterhours following the announcement.

We maintain our $4.90 fair value estimate for shares of no-moat BlackBerry after the firm reported fiscal second-quarter results. BlackBerry announced its high-level results earlier in September, and there were no surprises in the official filing. The firm’s cybersecurity business continues to struggle. While the fiscal-year outlook has been modestly lowered for the Internet of Things business, we maintain our long-term confidence in BlackBerry’s QNX software and our view that this is the strong part of the firm. We see shares as fairly valued and would point investors to moatier and more undervalued software names under our coverage.

We maintain our $4.90 fair value estimate for shares of no-moat BlackBerry after the firm announced preliminary results for its fiscal second quarter. BlackBerry’s fiscal quarter ended on Aug. 30, and its official earnings call is set for Sept. 27. The preliminary results included worse cybersecurity sales than guided, which wasn’t totally surprising to us, and a downward revision to the full-year outlook for the Internet of Things business.

We maintain our $4.90 per share fair value estimate for BlackBerry after it reported disappointing core software sales in its first fiscal quarter. Both cybersecurity and Internet of Things sales missed our expectations. We continue to see the cybersecurity business as a weak performer in a tough market, which contributes to our no-moat rating. BlackBerry registered its recent patent sale as revenue in the quarter, which led to inorganic sales growth and upside to non-GAAP earnings. We do not see this one-time sale as indicative of stronger fundamentals, and reiterate our view that it is value-neutral in the long run. BlackBerry shares rose as much as 15% after the print, we think due to the inflated top line figure and BlackBerry’s large mix of retail investor interest. We see shares as overvalued and recommend investors seek out moatier names at more attractive valuations.

We maintain our $4.90 fair value estimate for no-moat BlackBerry shares after the firm’s 2023 analyst day. Management largely reiterated existing targets and strategy throughout its presentations, in which we continue to hold moderate skepticism. We continue to have greater confidence in the firm’s Internet of Things business, which benefits from trends toward autonomous vehicles and is a market leader. However, the larger cybersecurity business remains disappointing and has an outsize effect on firmwide results. Overall, we see shares as fairly valued and would point investors to moaty and more discounted software names.

We maintain our $4.90 per share fair value estimate for BlackBerry after the firm’s board announced a strategic review on May 1. In our view, a strategic review is a welcome development following years of underperformance for the firm’s cybersecurity business. We reiterate our view that the QNX business is healthy, competitive, and primed for robust growth, while the cyber business is a market laggard losing share. Shares popped 8% following the news, but we continue to guide investors toward moatier, lower-uncertainty names in software.

We think BlackBerry has positioned itself in rapidly growing markets that benefit from secular trends toward security and connectivity, but we think it has a long way to go to earn a durable competitive advantage. BlackBerry sells software into enterprise cybersecurity applications and embedded applications like cars. Its products center on unified endpoint management and endpoint protection. In the automotive market, BlackBerry’s QNX software powers infotainment systems, where it leads the market, as well as electronic control units and advanced driver-assistance systems.

We maintain our $4.90 fair value estimate for no-moat BlackBerry shares after the firm reported fiscal fourth-quarter results. The firm had given a negative earnings warning at the start of March that led us to lower our valuation, and there were no surprises in the official results. The cybersecurity business sank sales, but the automotive business remains positive, in our view. Guidance was relatively positive, but doesn’t reflect a strong inflection. We continue to see BlackBerry as a stock that, while undervalued, will require immense patience from investors for a cybersecurity business that has yet to turn the corner. We recommend seeking moatier and lower uncertainty software names in our coverage.

We maintain our $4.90 fair value estimate for no-moat BlackBerry shares after the firm announced a deal for the sale of its noncore patent portfolio. The agreement represents the pending culmination of a tumultuous two-year process for BlackBerry. We reiterate that we like the decision to sell these noncore patents, from which BlackBerry had generated licensing revenue, to generate cash to invest in the core business. We think the deal is a fair price for the portfolio—we estimate about $500 million in total compensation including profit sharing. We don’t change our thesis on the company and believe even additional cash for investment won’t be enough to inflect a flailing cybersecurity business. We maintain our view that the Internet of Things business is the bright spot for the company. Shares trade below our fair value estimate, but we would point investors to moatier software names and emphasize our Very High Uncertainty Rating.

We lower our fair value estimate for no-moat BlackBerry shares to $4.90, from $5.90, after a negative warning of upcoming fiscal fourth-quarter results. BlackBerry’s cybersecurity business is having a horrid fiscal 2023, which fully reflects execution issues from the firm, in our view, that we expect to continue. We continue to view the auto business as a bright spot but one mostly blocked out by the shadow of a struggling, larger cyber business. Shares dropped 13% on the news and continue to trade below our fair value estimate. We would point investors to moatier software names at this time.

We think BlackBerry has positioned itself in rapidly growing markets that benefit from secular trends toward security and connectivity, but we think it has a long way to go to earn a durable competitive advantage. BlackBerry sells software into enterprise cybersecurity applications and embedded applications like cars. Its flagship enterprise product is the Spark suite, which combines unified endpoint management with endpoint protection. In the automotive market, BlackBerry’s QNX software powers infotainment systems, where it leads the market, as well as electronic control units and advanced driver-assistance systems.

We came away from the 2023 Consumer Electronics Show, or CES, impressed with BlackBerry’s Internet of Things portfolio, but saw nothing to change our long-term thesis on the firm. In short, we believe BlackBerry’s Internet of Things business is strong, but meaningful monetization appears far off, and we think the cybersecurity business is poorly positioned and set up for below-market growth. At BlackBerry’s booth, we saw demos of its IVY software with multiple software partners, as well as use cases for its QNX software. Its expanded relationship with Amazon Web Services, or AWS, for its cloud-delivered software is positive for the firm, in our view.

We cut our fair value estimate for no-moat BlackBerry to $5.90 per share, from $7.00, with reduced confidence in the firm’s ability to improve the execution of its cybersecurity business following fiscal third-quarter results. In our view, BlackBerry’s cybersecurity position has worsened, with sales well below levels of two years ago despite a fast-growing market. We also expect elongating sales cycles at enterprise customers over the next 12 months to add a headwind to a potential security rebound. We continue to see the firm’s embedded software in vehicles and industrial applications as a strong performer, but with weak monetization potential. Shares remain below our reduced valuation, but we remind investors of our Very High Uncertainty Rating on BlackBerry, and encourage seeking moatier software investments.

We think BlackBerry has positioned itself in rapidly growing markets that benefit from secular trends toward security and connectivity, but we think it has a long way to go to earn a durable competitive advantage. BlackBerry sells software into enterprise cybersecurity applications and embedded applications like cars. Its flagship enterprise product is the Spark suite, which combines unified endpoint management with endpoint protection. In the automotive market, BlackBerry’s QNX software powers infotainment systems, where it leads the market, as well as electronic control units and advanced driver-assistance systems.

We retain our $7 fair value estimate for no-moat BlackBerry after it reported fiscal second-quarter results that were slightly above FactSet consensus and a tick below our own expectations. The firm’s Internet of Things business continues to grow as QNX earned a design win with Volkswagen during the quarter, and we think it can maintain long-term momentum. On the flip side, we are wary of BlackBerry’s cybersecurity prospects in the near term with another quarter of sequential decline and little to show for its previous headcount and investment increases. We still view management’s fiscal 2027 targets as overly ambitious due to a lack of execution on its go-to-market approach. The market responded negatively to the results, with shares down 2% after hours. Following recent market selloffs, we view shares as slightly undervalued but recommend investors seek a greater margin of safety before entering into this Very High Uncertainty name.