If you know want to know how fast things can change in the tech world, just take a look at BlackBerry Ltd (NYSE:BB).
The Waterloo, Ontario, Canada-based tech company that used to go by the name of Research in Motion was once the biggest competitor of Apple Inc. (NASDAQ:AAPL).
Today, BlackBerry is a beaten-down stock that trades at less than $6.00 apiece while Apple commands a market capitalization of well over $1.0 trillion.
Losing to Apple in the smartphone business has no doubt hurt BlackBerry and the price of BB stock. However, keep in mind that today’s BlackBerry is very different from what the company was back then. Now it doesn’t sell smartphones; instead, its focus is on software and services.
Given that Blackberry stock trades at just a small fraction of where it was a few years ago, it’s natural to assume that business must still be deteriorating at the company. But that’s not really the case. Despite not being a hot tech stock anymore, BlackBerry Ltd’s business has actually been booming.
According to the company’s most recent earnings report, BlackBerry generated $261.0 million of non-generally accepted accounting principles (GAAP) revenue in the second quarter of its fiscal-year 2020, which ended August 31, 2019. The amount represented a 22% increase year-over-year. (Source: “BlackBerry Reports Fiscal 2020 Second Quarter Results,” BlackBerry Ltd, September 24, 2019.)
Like I said, BlackBerry is now a software and services company. In the second quarter, the company’s non-GAAP software and services revenue totaled $256.0 million. This not only represented 98% of BlackBerry’s total top line, but also marked a 30% increase from a year ago.
At the bottom line, BlackBerry’s non-GAAP earnings came in at $0.00 per share, suggesting that it broke even for the quarter.
Notably, the company also generated $17.0 million in free cash flow, before considering the impact of acquisition and integration expenses, restructuring costs, and legal proceedings. In the tech industry, being free-cash-flow positive is certainly a good sign.
Is the Best Yet to Come?
The reality is that, while BB stock doesn’t seem like a hot commodity at the moment, the company does in fact run a growing business. And based on what’s happening in the tech (NYSEARCA:XLK) world right now, the growth momentum could continue for BlackBerry Ltd.
You see, despite losing to Apple in the smartphone business, the company has built a solid presence in an increasingly important tech segment—security. In particular, BlackBerry’s security software and services have been a go-to choice for enterprises and governments.
And as we enter the Internet of Things era, more and more devices are going to be connected, meaning the demand for safety, cybersecurity, and data privacy will further increase.
According to BlackBerry’s latest investor presentation, the Internet of Things has created four unique growth opportunities for the company: crisis communications, embedded software, endpoint security, and unified endpoint management. (Source: “BlackBerry Investor Presentation Q2 FY’20,” BlackBerry Ltd, last accessed November 4, 2019.)
Combined, the Internet of Things total addressable market for BlackBerry is a whopping $22.0 billion, and that market is expanding at a compound annual growth rate (CAGR) of 27%.
With a vast and growing total addressable market, BlackBerry is well positioned to keep growing its business. Management now expects the company’s billings to increase by a double-digit percentage in its full-year fiscal 2020. This would help drive BlackBerry’s non-GAAP revenue up by 23% to 25% year-over-year.
At the same time, the company is expected to turn a non-GAAP profit in its fiscal 2020.
BlackBerry Ltd (NYSE:BB) Stock Chart
Chart courtesy of StockCharts.com
Put it all together and you’ll see that BlackBerry Ltd has come a long way in the last few years. The company now has a growing top line, and its adjusted bottom line is projected to be positive in the full fiscal year.
For investors interested in getting a piece of the action from the booming tech industry, Blackberry stock now deserves a look.