BlackBerry Stock Surges as Reddit Hype Triggers Short Squeeze

BlackBerry (TSX:BB) stock has recently joined the ranks of meme stocks like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC), becoming one of the top three trending stocks on Reddit. The stock has witnessed a short squeeze, with its price surging by 17.9% from its 52-week low to trade at $3.95 per share. The hype surrounding BlackBerry on social media platforms has been significant, with the stock recording a 3,894% increase in mentions on Reddit’s most popular stock and cryptocurrency subreddits in a single day.

Long-Term Prospects and Near-Term Challenges

BlackBerry, once a major player in the early smartphone industry, is now primarily focused on providing intelligent security software and services to enterprises and governments. The company is undergoing a restructuring that will see it operate two independent businesses within in-demand segments: endpoint security and the Internet of Things (IoT). The IoT segment, which offers QNX Software and IVY vehicle communication, has seen its backlog for QNX royalties increase from US$640 million in fiscal 2023 to US$815 million in fiscal 2024.

The company expects its revenue from the IoT segment to grow by 9.3% in fiscal 2025, driven by the recovery in automotive demand and the rise of the 5G ecosystem. However, BlackBerry’s cybersecurity segment faces stiff competition and uncertainties in the business landscape, leading to a projected 3.4% drop in revenue from this segment in fiscal 2025.

Despite these near-term challenges, the company anticipates an improvement in revenue from the cybersecurity segment in the long run, driven by the increasing demand for endpoint security in the 5G environment.

Financial Performance and Potential Separation of Business Units

BlackBerry’s fiscal year 2024 financial results exceeded expectations, with total revenue rising by approximately 30% year-over-year to US$853 million. The company posted an adjusted annual net profit of US$31 million, a significant improvement from the adjusted net loss of US$103 million in the previous fiscal year.

The company is considering separating its cybersecurity and IoT business units into two independently operated entities to enhance shareholder value. While the timeline for this proposed separation is unclear, such a move could unlock the potential of each segment and allow them to focus on their respective markets and customers.

In the final quarter of the fiscal year 2024, BlackBerry’s IoT division achieved a record revenue quarter and marked a significant milestone with a QNX royalty backlog that surged to $815 million, a 27% year-over-year jump. This substantial backlog underscored the strong market demand and the IoT segment’s robust pipeline with sustained growth.

Outlook for BlackBerry Stock

Despite the recent surge in BlackBerry’s stock price, the company’s long-term growth outlook remains strong. BlackBerry is striving to accelerate growth by enhancing its cybersecurity and IoT offerings with the help of artificial intelligence and machine learning technology.

However, macroeconomic and geopolitical uncertainties could keep BlackBerry’s stock volatile in the next year. Nonetheless, given the company’s long-term growth potential and the recent losses that have made the stock appear undervalued, BlackBerry could be a promising long-term growth stock at its current market price.

Is BlackBerry Stock a Good Long-Term Investment?

BlackBerry’s stock has experienced a significant surge due to the hype generated on social media platforms, particularly Reddit. The company’s restructuring efforts and focus on the IoT and cybersecurity segments have positioned it for long-term growth, despite near-term challenges. While the stock may remain volatile in the short term due to macroeconomic and geopolitical uncertainties, BlackBerry’s long-term growth prospects make it an attractive option for investors seeking a promising long-term growth stock.