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Shares of beleaguered tech giant BlackBerry Ltd (NASDAQ:BBRY) have been on fire in 2017, soaring 21% over the past week. And if you’ve held BBRY stock since the start on the year, you’re sitting on more than 60% gains versus just 7% for the S&P 500 index.
Just how long, exactly, can BlackBerry keep up this torrid pace?
Assessing the value of BBRY stock has become tough exercise, given that the Canadian company — which has ceded the smartphone market to Apple Inc. (NASDAQ:AAPL) and Samsung Electronics (OTCMKTS:SSNLF) — is now focusing on software and services for growth. The extent to which BlackBerry can carve out a successful niche in areas like security is unclear, but the potential is at least there.
BlackBerry stock might not be able to put up another 60%-plus in five months, but it can still clobber the rest of the market. I believe BBRY looks great from a risk-reward perspective, and that it can top the $15 mark in 12 to 18 months — some 30% higher from here.
What’s Going Right for BlackBerry?
BlackBerry shares, which currently trade a little higher than $11, jumped more than 18% higher last month after the company announced that it was awarded nearly $815 million in an arbitration decision related to its dispute over payments made to Qualcomm, Inc. (NASDAQ:QCOM).
The award comes nearly a year after BlackBerry and Qualcomm agreed to arbitrate a dispute over whether QCOM’s cap on certain royalties applied to payments that BlackBerry made under a license agreement between the two companies.
“BlackBerry and Qualcomm have a longstanding relationship and continue to be valued technology partners,” said BlackBerry CEO John Chen. “We are pleased the arbitration panel ruled in our favor and look forward to collaborating with Qualcomm in security for ASICs and solutions for the automotive industry.”
Blackberry, which posted quarterly revenue of $286 million, and lost $47 million, can use that cash to firm up its balance sheet. And when factoring patent suit BlackBerry just filed against Nokia Corp (ADR) (NYSE:NOK), one can argue that BBRY seems intent on litigating its way to growth.
But unlike previous head fakes with the share price, BlackBerry, which is finally making money, is now in much stronger position to deliver long-term value.
BlackBerry’s QNX software powers some 50 million In-Dash Infotainment systems (IVI) in vehicles. The company is now competing head-on with of Apple and Alphabet Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) subsidiary Google.
The QNX story just got a boost on Monday, too, with Ford Motor Company (NYSE:F) agreeing to expand the use of QNX across its vehicles, driving BlackBerry shares nearly 9% higher.
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Bottom Line for BBRY Stock
Last week Macquarie analyst Gus Papageorgiou, while citing the company’s RADAR solution, laid out a scenario where BBRY stock can reach $45 in the next few years.
The RADAR system is a service designed to provide customers with information about their trailer, chassis and container fleets that matches reality. RADAR customers “are seeing a reduction in the amount of trailers needed to manage existing sales thanks to the more efficient use of the assets,” Papageorgiou said last week.
Papageorgiou has an “Outperform” rating on BBRY stock with 12-month price target of $11.80.
While I agree with Papageorgiou’s general bullish take on BlackBerry, the target seems too low, especially in the wake of Monday’s Ford partnership.
BlackBerry is priced at just 13 times fiscal 2018 estimates of the 8 cents per share, which calls for 300% growth. With recent fundamental improvements and cash coming in from patent disputes, BBRY stock should reach at least $15 in the next 12 to 18 months, delivering roughly 35% returns.
An investment today seems like a no-brainer.