BlackBerry's (BB) Rally Extends Beyond Meme Stock Frenzy: Here's Why

·6 min read

The second wave of ‘meme stock’ frenzy that hit the markets early this month, after a much-hyped rally in January, fizzled out after a brief flurry that sent their share prices to record highs. Buoyed by the hype in social media forums such as Reddit's WallStreetBets, these stocks appear to be guided by a ‘social uprising’ and apparently lack solid business fundamentals.  

Meme stocks seem largely overpriced, and experience spurts of rapid growth in short span of time, mostly triggered by small traders who cause a short squeeze on the stock. These short sellers place their bets on a likely fall in share prices of a stock and then rush to hedge their positions, leading to a sharp rise in demand for such stocks and a huge rally in share prices. Consequently, investors looking to add meme stocks to their portfolio will not only have to pay a premium but also have to be ready for significant market volatility.

This asset class comprises a bevy of diversified companies that fill the bucket of the meme stock phenomenon, including GameStop Corp. GME, AMC Entertainment Holdings, Inc. AMC, BlackBerry Limited BB and Bed Bath & Beyond Inc. BBBY among others. The list has ballooned in the recent times with several firms joining the bandwagon to stir investor interests. Some of these stocks’ momentum continued even after the broad-based rally fizzled out weeks before. Blackberry is a notable stock in this list.

Let us delve a little deep to gauge the underlying metrics that is driving this stock.

As a leading player in the enterprise mobility management, BlackBerry 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 offers an end-to-end software and services platform for the Enterprise of Things, which includes computers, vehicles, sensors, equipment and other connected endpoints within the enterprise that communicate with each other to enable smart business processes.

Notwithstanding the challenging macroeconomic conditions, BlackBerry continues to invest in product development and go-to-market strategy, including strong channel partnerships, to drive long-term sustainable growth. The company is capitalizing on the secular trends of securing and connecting endpoints, which has become the call of the hour with increasing cybercrimes. It enables Enterprise of Things by providing the technology that allows endpoints to trust one another, communicate securely and maintain privacy. Solid software sales continue to aid the company while growth in its cybersecurity business remains a huge positive.

With a holistic growth model, focusing both on organic and inorganic initiatives, BlackBerry aims to expand its market leadership in the enterprise mobility segment. The company leverages many elements of its extensive technology portfolio to extend best-in-class security and reliability to its solutions for the Enterprise of Things, including unified endpoint management, cybersecurity solutions, embedded systems, crisis communications, enterprise applications and related services, with hosting available on the company’s global, scalable, secure network, as well as in the cloud.

BlackBerry recently collaborated with BiTECH Automotive (Wuhu) Co., Ltd — a China-based automotive parts manufacturer — to offer a digital LCD instrument cluster for a more personalized driving experience. The product is already being used for the mass production of a new SUV dubbed UNI-K, manufactured by Changan Automobile — a leading China-based automaker.

The operating system of these models is run by BlackBerry QNX Neutrino real-time operating system. It offers a comprehensive secure and intelligent connected vehicle software platform for safe driving decisions and in-vehicle applications. The digital LCD instrument cluster offers an advanced smart driving assistance program and a smart cockpit with an Interactive Monitoring System, displaying a variety of information for the diversified needs of consumers. These include tire pressure, door conditions, vehicle speed, augmented reality real-view navigation, a multimedia interface, a digital rear-view mirror, the tachometer and the fuel gauge.

BlackBerry QNX offers a broad portfolio of software solutions for the automotive industry. These include infotainment, connectivity, in-car network security, type-1 hypervisor supporting multiple ECU (engine control unit) integration into domain controllers, ADAS (advanced driver-assistance systems) and acoustics. Its Over-The-Air software update platform ensures security of the automotive software for flexible, scalable solutions for vehicle systems and the next generation of connected and autonomous vehicle architecture. The QNX software allows automotive OEMs to develop and run a common software platform across in-vehicle systems such as gateways, TCUs, engine controllers, digital cockpits and emerging domain controllers. The vehicle data is then used to build software applications and machine learning (ML) models, and deployed inside the vehicle to enable in-vehicle inference and actions.

BlackBerry has also inked a multi-year global agreement with Amazon Web Services, Inc. (“AWS”) — the cloud computing platform of Amazon.com, Inc. AMZN — for the development of a secure and intelligent connected vehicle software platform for in-vehicle applications. Dubbed BlackBerry IVY, the scalable cloud-connected software platform will integrate BlackBerry QNX real-time operating system with AWS’ IoT services in the cloud and in the car to develop a comprehensive edge-to-cloud offering for diversified car brands.

Each vehicle model typically includes a unique set of proprietary hardware and software components from different suppliers, which often limit developers’ abilities to decipher and interact promptly with data from diverse sensors. Blackberry IVY intends to address this issue by leveraging ML techniques to generate predictive insights and provide automakers a consistent and secure way to read vehicle sensor data, driver habits and engine reliability metrics. This, in turn, will enable automakers to create responsive in-vehicle services that enhance driver and passenger experiences that could potentially lead to less accidents in driverless vehicles.

Riding on such partnerships and innovative product portfolio, Blackberry appears primed for further growth in the long run. Investors, therefore, could benefit if they bet on this Zacks Rank #3 (Hold) stock for a long-term period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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