I believe there is a lot of potential in Blackberry (BB). I realize BB got caught up in the meme stocks, but this is a serious post regarding an iconic Canadian company and I think some discussion is necessary.
If you haven’t been following BB, they no longer make phones and have transitioned to software. Their two main plays are cybersecurity and IoT, with a specific focus on QNX, a real-time operating system used by 24 of the top 25 electric vehicle manufacturers (only missing Tesla) and medical/industrial equipment. However, the focus of this post is on a new product, called Blackberry Ivy, being launched by BB in partnership with Amazon AWS.
Ivy is an auto software product that processes and standardizes sensor data both in the car and in the cloud. It allows for applications do be built easier in cars and, in my opinion, will transform the auto apps market just like Apple app store or Google Play did to phone apps.
To give just one example of what Ivy could do, imagine being a third-party app developer who wants to build an app for the auto market that recognizes when a vehicle occupant has fallen asleep, so the vehicle environment can be adjusted for a more enjoyable ride (e.g. The app would turn off air conditioning and increase temperature, turn off volume from closest speaker, etc.). The way to determine if an occupant has fallen asleep is by using data from an inward-facing camera. However, the auto manufacturer would never grant access to raw camera data to a third-party app developer. This is where Ivy comes in. Ivy standardizes the outputs, so you do not need the raw data. The data from the camera is sent to Ivy, where it is processed to standard outputs (e.g. Driver = awake, Front-Passenger = awake, Rear-Right-Passenger = asleep, etc.). The app developer uses these standardized outputs to create some action in the vehicle.
An app created with Ivy can then be used with any auto manufacturer using Ivy software, whether this be BMW, Stellantis, Ford, etc. creating a much larger app market than if the developer had to create specific apps for each manufacturer, especially for niche apps. Ivy would also make it easier for manufacturers to create their own applications as app developers would not necessarily need to be experts with analysing the raw data as Ivy creates standardized outputs.
The previous example is just a single example. There are numerous use-cases that can be described for vehicle payment systems, insurance, car maintenance, etc. with many of these already in the works. There is also tremendous potential for a consumer-focused or novelty app marketplace. For example, a third-party developer could make an app that identifies the occupants and their music preferences, so the vehicle only plays songs that the most number of occupants would enjoy. That way someone who loves country music will not have to suffer through a rap playlist (e.g. Ivy outputs: Occupant ID: 30432493, Occupant ID: 34824492 to a Spotify app algorithm cross-references these IDs with playlists and finds songs both occupants would enjoy). This, of course, assumes some level of permission has been given by the occupants to be identified.
Amazon AWS has been pumping Ivy lately and it made a number of appearances in workshops and presentations at re:Invent. It is expected that there may be an announcement at CES in January announcing the first deal for Ivy (I suspect it will be Stellantis). I expect most non-Tesla manufacturers will eventually sign-on to Ivy instead of trying to got it alone with app development (Ironically, BB tried to go it alone versus Apple/Android and we see what happened to them).
BB mentioned in the summer that they believe the SAM for Ivy-related products in 2024 will be ~$800M. Since most cars either run on BB’s QNX (~20M cars/year) or are Tesla (~2M cars/year), we can use that number as a guide for revenue (~$36.36/year/car). If 50% of cars running QNX were to adopt Ivy, this would bring in $182M in revenue just for that year. Since Ivy is expected to be reoccurring subscription revenue, this amount would snowball.
The SAM disclosure can be found here @ 24:17 (Note: FY 2025 for BB is essentially calendar year 2024): https://wsw.com/webcast/oppenheimer23/bb/2273700
BB has since mentioned that initial number of cars with Ivy would start smaller (late 2024/early 2025) and then grow. Since AWS Fleetwise pricing comes out to about $5.63/year/car for a fleet of 1M cars, a conservative starting price for Ivy would be $10/year/car ($5/year/car being BB's cut of the revenue). I believe a reasonably conservative estimate would be for 0.5M cars to adopt Ivy in 2024 (representing just ~2.5% of QNX production in a year), followed by 1M in 2025 (~5% of QNX), and 2M in 2026 (~10% of QNX). Even if Ivy adoption were to max out at 2M cars/year (which, I would take to be a failure), this would be the expected revenue:
2024 - $2.5M
2025 - $7.5M
2026 - $17.5M
2027 - $27.5M
2028 - $37.5M
If Ivy could hit 10M cars/year (~50% of current QNX production) by 2026 and 15M cars/year by 2028 (~75% of QNX), the revenue numbers could look something like this:
2024 - $2.5M
2025 - $12.5M (assumes hitting 2M cars)
2026 - $62.5M
2027 - $125M
2028 - $200M
I believe these numbers are still conservative and underestimate the potential of Ivy, in part, because they do not take into account further growth of the electric vehicle market or growth of cost of Ivy per vehicle.
Because Ivy is expected to be reoccurring revenue, even smaller initial revenue numbers will snowball and have a significant affect on stock price. BB will now be valued more like a high growth stock. BB currently has a P/S ratio of 4.0. High growth stocks like Crowdstrike (12.7), Cloudflare (17.2), and ZScaler (13.3) all have much higher P/S ratios (the current downturn in the market has slashed these P/S ratios in half compared to earlier in the year). If BB were to be valued similar to these companies (e.g. P/S ratio of 15) that would put the stock price for 2024 at $15.41 USD/share. This target stock price does not take into account the revenue from Ivy, only BB being valued more like a growth stock. This price also takes into account the current depressed market conditions by using comparable companies. If the market were to improve or BB were to beat some of the conservative estimates, then the stock price would easily be in the 20s and, potentially, the 30s.