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BlackBerry Stock: Is It Cheap Below $7?

BB shares experienced a sell-off in February after CEO John Chen announced plans to sell a third of his shares. Does BlackBerry stock look attractive below $7 per share?

Canadian cybersecurity company BlackBerry  (BB) - Get BlackBerry Limited Report has been one of the most talked-about stocks among the Reddit investing community.

Just over a year ago, the stock was heavily influenced by "meme mania." Its 52-week high is around $20, but today, it's valued at less than $7 per share.

BlackBerry is entering a new era, moving away from its smartphone business – it recently announced the sale of its patents – and focusing on cybersecurity and software. Investors and shareholders alike are looking forward to BlackBerry's prosperous future in these emerging markets.

Figure 1: BlackBerry Stock: Is It Cheap Below $7?

Figure 1: BlackBerry Stock: Is It Cheap Below $7?

(Read more from Wall Street Memes: BBBY Stock: Ryan Cohen Steps In, Short Sellers Scramble)

Why Is CEO John Chen Planning to Sell His Shares?

According to a company filing, Chen plans to sell a third of his shares starting in March of this year and ending in February 2023 in a plan in accordance with U.S. and Canadian law.

Based on BlackBerry's current share value, the 2.9 million shares to be sold would be valued at roughly $18.5 million.

So why buy the company's shares if the CEO is planning to sell them? When the CEO of a company announces the sale of a large part of his shares, it raises questions in the market.

In particular, it makes shareholders wonder if a company's management has faith in its business. That's especially the case for BlackBerry, which is currently a growth company.

But looking on the bright side, the way Chen is planning his sales within a one-year period may mean that he expects the company’s core business to generate consistent revenues. Thus, the scheduled sales could be a good way to take advantage of an improvement in BlackBerry's share price.

Canaccord Still Sees Upside Ahead

Not a lot of analysts cover BlackBerry. But in late February, Canaccord analyst Michael Walkley reiterated his bullishness on BlackBerry even though he lowered his price target from $10 to $7.

According to Walkey, he's bullish on BlackBerry due to cybersecurity spending trends within the software market with large long-term growth gains. But the reason for his lower price target is due mainly to the current broader multiple compression momentum for software and cybersecurity stocks.

Long Term, BB Should Pay Off

CEO John Chen's share sales plans have clearly not been well received by the market. BlackBerry shares dropped nearly 14% since the announcement was made, and the stock is currently trading below $7 for the first time since 2020.

However, even with questions surrounding the real motives behind the insider selling, some optimistic investors may consider BlackBerry to be cheap for a growth stock at current levels. However, others believe that, even when factoring in some significant growth over the next few years, a $10-per-share price for BB is too much.

Looking at the projections for the global cybersecurity market is quite exciting. This emerging market promises to be worth $346 billion over the next five years at a CAGR of 13.4%. Also, in the automotive software market alone, it is expected to reach $66 billion by 2031 at a CAGR of 13.4% by 2027.

But of course, while BlackBerry is competing in several markets with great growth potential over the next five years at least, we still need to see the company demonstrate its ability to generate consistent revenues from its technology.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)