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Amazon Could Power BlackBerry Stock to New All-Time

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starman2   Saturday, 02/13/21 06:12:49 PM
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Amazon Could Power BlackBerry Stock to New All-Time Highs
Chris MacDonald | February 12, 2021

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Image source: Getty Images

It appears BlackBerry (TSX:BB)(NYSE:BB) has made it to the big leagues — at least, as far as the company’s suite of software products is concerned.

I think the company’s partnership with Amazon.com (NADAQ:AMZN) is a transformational one for this company. Additionally, I think the growth thesis behind BlackBerry could propel this stock to new highs in the future.

Despite a rapid sell-off of late, investors may be enticed to sit on the sidelines to wait for the volatility to subside. Indeed, speculation that the Reddit-fueled momentum behind this stock is gone has spooked some momentum investors. That said, I think BlackBerry was a target of many growth investors prior to the “WallStreetBets” phenomenon of recent weeks. Whether this stock is loved by the WSB crowd is irrelevant, in my view, to long-term growth investors who like the story with this company today.

This is a marathon, not a sprint
At the end of March, BlackBerry is expected to report earnings. This is a relatively decent amount of time for BlackBerry to get to work and show improved results. The extent to which the Amazon-BlackBerry deal will pay off right away remains uncertain. However, I think investors should focus on the long-term impacts this deal could have.

This is a transformational deal I think has the potential to continue to provide a growth thesis underpinning a consistently higher valuation multiple. BlackBerry has continued to trade closer to a hardware provider than a software company in recent years. I think this dynamic could change.

Valuation isn’t unreasonable right now
In a recent article, fellow Fool contributor Joey Frenette aptly commented on BlackBerry’s current valuation. He wrote: “After the latest +50% plunge, BB stock trades at 7.7x sales. That’s not a high price to pay for a firm that’s heavily involved in the cybersecurity scene.” I have to agree. Compared to other high-flying software stocks right now, BlackBerry looks cheap.

He continued: “While I’ve often referred to BlackBerry as a difficult turnaround stock to evaluate, given all the moving parts and acquisitions that have been made over the years. This difficulty in valuing the stock, I believe, was a top reason why I thought BB stock was a gem that was hiding in plain sight.”

BlackBerry could indeed continue its rise, if investors believe in the growth story this company is telling. Right now, this is a difficult stock to value. I think investors will have a clearer line of sight into what the future growth and earnings potential of BlackBerry looks like in the coming quarters.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Chris MacDonald has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.

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