Comeback kid? A 65% surge this year suggests investors are warming up to BlackBerry’s turnaround strategy

BlackBerry Ltd.’s comeback streak continued this week on the stock market, indicating investors have finally dialled into the former smartphone titan’s shift to software with a focus on security and the automotive industry.

Sentiment from investors and analysts alike hovered around lukewarm as BlackBerry underwent a three-year transition from a mobile phone producer – it officially gave up on designing its own last fall — to a software company with a variety of offerings targeted at enterprises that value its reputation for security.

But investors appear to be warming up to the strategy, especially over the last two months when a series of stock surges pushed BlackBerry’s shares up more than 65 per cent since the beginning of the year.

The latest of four stock price spikes hit the Toronto Stock Exchange on Tuesday (it occurred on the Nasdaq Stock Market on Monday, a holiday in Canada) in response to Ford Motor Co.’s Friday announcement about improvements to its in-car system, which is based on BlackBerry’s QNX software.

Ford, which recently hired about 400 BlackBerry engineers, announced the ability to update its Sync 3 systems over Wi-Fi instead of having to visit a dealership or download and install with a USB key. QNX software is used to power such systems in more than 60 million vehicles worldwide.

“BlackBerry is well positioned at the epicenter of this transformation,” CCS Insight analyst Nicholas McQuire said.

BlackBerry’s shares rose nearly 9 per cent to $15.27 on the TSX on Tuesday, hitting its highest price in more than four years. It jumped more than 9 per cent to US$11.32 in the U.S. on Monday – the highest since July 2014 – before dipping two cents Tuesday.

The stock started its upward trajectory in late March with an 11 per cent surge when BlackBerry reported quarterly results that beat Bay Street’s expectations. The next bump came mid-April when it won US$815 million in a binding arbitration in a dispute with Qualcomm over royalty payments.

“This chunk of change from Qualcomm has really changed investor sentiment on BlackBerry,” said Canaccord Genuity analyst Michael Walkley.

The third jump came last week when Macquarie Group’s Gus Papageorgioua, a long-time BlackBerry analyst, predicted its stock could quadruple by 2020 on the strength of its software for the trucking and automotive industries.

A heightened focus on cyber security hasn’t hurt either. This month’s global “ransomware” attack, dubbed WannaCry, raised awareness of BlackBerry’s security software business, said CCS Insight’s McQuire.

BlackBerry didn’t miss the chance to use WannaCry as a sales opportunity. In a blog post explaining the ransomware attack, BlackBerry pitched its services and proffered tips to protect organizations.

“BlackBerry’s unparalleled cybersecurity expertise can help your business recover from ransomware attacks and more importantly prevent them in the future,” it stated last week, adding that it now offers a “ransomware readiness assessment” to determine how ready a business is to withstand such an attack.

BlackBerry does not reveal how much revenue it earns from specific software products, instead lumping them together in one segment that CEO John Chen believes will grow at a faster rate than the overall market in the upcoming fiscal year.

But investors seeking clues around growth for specific divisions that analysts are particularly bullish on such as Radar, a trailer tracking service for the trucking industry, might get more information in June. Chen announced plans to shake up the reporting structure to reflect BlackBerry’s new status as a software company.

It is scheduled to report its next round of financial results on June 23.