BlackBerry (TSX:BB) inventory shocked traders in the previous few months, rising 125% between December 2024 and February 2025. Nevertheless, this rally was short-lived, because the market reacted to one thing constructive in an organization that was depleting its money reserves with fixed losses.
BlackBerry’s inventory value rally is unsustainable
BlackBerry reported its first-ever working money move in a few years in November 2024, which pushed the top off 47% to $36.95 as of December 26, 2024. The inventory held that value in January in hopes of a restoration within the automotive market, because the newly elected U.S. president, Donald Trump, had promised to make automobiles inexpensive to Individuals.
Whereas issues overturned in February with the announcement of U.S. tariffs on Canada and Mexico exports, BlackBerry inventory surged one other 40% between February 3 and 18. Behind this rally was the completion of the sale of Cylance to Arctic Wolf. At this level, BlackBerry’s administration had downsized the enterprise. They solely stored profit-generating companies and offloaded loss-making companies that wanted excessive analysis and improvement (R&D) bills.
Therefore, it comes as no shock that BlackBerry reported its first web revenue in a very long time of US$2 million within the first quarter ended Might 31, 2025. The inventory jumped 12.5% after the earnings launch on June 24 and has fallen 17.6% since then.
All through this journey, BlackBerry inventory couldn’t maintain its rally. Why?
BlackBerry’s valuation and progress mismatch
At a share value of $5.42, BlackBerry inventory is buying and selling at a price-to-sales ratio of 4.38, which is excessive for an organization whose income has been falling. The corporate relies on QNX software program to drive progress. Its different enterprise, Safe Communications, continues to see churn charge as prospects transfer to a cloud-based structure.
How do the following two years play out for QNX?
Though QNX has secured a number of product wins with automotive prospects, the general automotive sector has been in a downturn after the 2022 semiconductor provide scarcity. Automotive gross sales failed to select up, however QNX royalty income continued to build up. On the finish of FY25, the royalty backlog rose to $865 million from $815 million a yr in the past.
BlackBerry’s administration has been ready with bated breath to unlock this income, but it surely has been dragging on for 4 years. I’ve turned bearish on BlackBerry as a result of it was not optimizing its QNX past automotive.
Within the first quarter, the administration acknowledged that it’ll deal with diversifying QNX to Normal Embedded Market (GEM) purposes, like robotics, industrial automation, and medical units and tools. Round 55% of its QNX pipeline within the first quarter of fiscal 2026 is in GEM.
The renewed deal with diversifying in GEM is welcome. Nevertheless, it’s higher to undertake a wait-and-see method to see if the GEM product combine converts into precise income or piles up within the backlog.
The one inflection level for BlackBerry will come when the QNX royalty backlog is unlocked.
How do the following two years play out for Safe Communications?
BlackBerry’s Safe Communications section largely caters to governments, which have a prolonged decision-making course of. On one hand, it has been shedding enterprise as firms transfer to the cloud. However, it secured Unified Endpoint Administration offers from a broad spectrum of consumers, together with the U.S. Particular Operations Command, U.S. Air Power, the U.Ok.’s Sellafield Nuclear Energy Institution and Nationwide Grid, the Qatar Nationwide Financial institution, main U.S. Financial institution Oppenheimer, and the Netherlands authorities shared companies.
This section might assist BlackBerry generate a minimal money move, as new contracts offset churn charge. Nevertheless, I don’t anticipate any important progress on this house.
What can traders anticipate?
BlackBerry operates in a extremely aggressive market, and its product high quality helps it get pleasure from sturdy goodwill. Fiscal 2026 would be the first full yr of BlackBerry’s downsized core companies on which it is going to focus. From this level, traders ought to intently monitor income progress, as it’s the place future upside can be realized.
I don’t anticipate any extra sudden progress triggers in BlackBerry’s share value because the tariff announcement doesn’t instantly have an effect on its inventory value. It might see sustainable progress if the automotive market sees a restoration.