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CEO John Chen Sees BlackBerry Stock as Undervalued. Is He Right?

A few days ago, just before the start of CES 2022, BlackBerry CEO John Chen said in an interview that he believes that BB shares are undervalued. Is Chen right?

BlackBerry  (BB) - Get BlackBerry Limited Report, the Canadian cybersecurity company, recently announced some updates related to its business and future projects.

Right before CES 2022 (CES, the Consumer Electronics Show, is an annual, and hugely influential, Las Vegas-based tech trade show) CEO John Chen was interviewed by CNBC. When asked about BlackBerry stock’s price hovering around the $10 mark, well below its meme-driven peak of $25 per share a year ago, Mr. Chen said that he believes BB is undervalued.

Let’s take a deeper look at the CEO's responses and determine whether or not he’s right about BB's potential.

Figure 1: BlackBerry's CEO John Chen.

Figure 1: BlackBerry's CEO John Chen.

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BlackBerry’s CES 2022 announcements

Seen by many as an important catalyst for BlackBerry in 2022, the company's participation at the CES 2022 event allowed it to offer public demonstrations of some of its new tech. That tech included BlackBerry’s IVY and QNX and its Jarvis update. The company also got a platform to expand on its partnerships with China.

The market showed little enthusiasm for BlackBerry’s recent developments, however. Shares fell 5% before CES 2022 started on January 5 but soon regained most of those losses, rising 4% after the event ended. Those hoping for a meteoric rise during or immediately post-CES were surely left disappointed.

Perhaps the biggest buzz BlackBerry got surrounded its first public display of BlackBerry IVY (developed in partnership with Amazon AWS), which was paired with BlackBerry’s QNX software in a Jaguar I-PACE. The applications for these combined systems are many and varied; some of the most exciting potential uses are in the automotive industry, where these systems could help vehicles quickly exchange data with a “smart city” environment.

Also on display were new updates to BlackBerry’s Jarvis 2.0, which now offers a comprehensive software suite to simplify regulatory compliance and secure software supply chains. You can watch a brief video of the BlackBerry booth at CES 2022 below.

Is Mr. Chen right?

Prior to CES 2022, CEO John Chen was interviewed by CNBC about the recent announcements and updates that would be showcased at the event. During the interview, the CEO was quite enthusiastic about the company’s recent technological advancements in cybersecurity and software. When asked about BlackBerry's stock being at $10 levels, the CEO replied:

"Obviously, as we are running the company, we feel that we're undervalued. There is a lot of potential in our stock [BB stock] and we need to show some revenue growth. But we're positioning ourselves in cybersecurity, auto industry, embedded software, I think and we are hoping that this is a long-term rewarding stock to shareholders."

Mr. Chen also mentioned that the new, cybersecurity and software development-oriented BlackBerry is now in a much broader market than the old, hardware and smartphone-oriented BlackBerry. Being a smaller fish in a larger pond, the company must now make bigger and better achievements.

According to data from third-party research firms, the global cybersecurity market will be worth $346 billion over the next five years at a CAGR of 13.4%. Meanwhile, the automotive software market was valued at $16.46 billion in 2020 but is projected to reach $66.81 billion by 2031, registering a CAGR of 13.4% from 2020 to 2027.

BlackBerry, taking advantage of the growth of these emerging industries, has a real chance to benefit and grow in the near future - it currently has contracts with more than 45 automotive OEMs and its technology is already present in 24 to 25 electric vehicles platforms which, cumulatively, are used by over 195 million vehicles on the road today.

The bottom line

Some optimistic investors may consider BlackBerry to be cheap for a growth stock at current levels. Others, however, believe that, even when factoring in some significant growth over the next few years, a $10 per share price for BB is too rich.

Although BlackBerry is now competing in several markets with excellent growth prospects over the next five years, the company needs to demonstrate that it is capable of generating consistent revenues with its new technologies - until then, it is still too early to tell if it’s valued fairly.

Wall Street is bearish on BB, holding a “moderate sell” consensus and a price target of $7.75 for the next twelve months. This target is largely derived from the company’s underwhelming revenue generation. Much of the stock’s high volatility has been driven more by meme appeal than by changing opinions on valuation. Still, there’s a chance that Wall Street is overlooking BB's real, non-meme, long-term growth potential. 

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(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 the Wall Street Memes)