Since the end of May 2021, retail traders have initiated another round of short squeezes in meme stocks such as BlackBerry (BB) and MicroVision (MVIS). BlackBerry’s stock rose from $10.37 on May 25 to $19.12 on June 3. It is currently trading at $15.5 and has gained over 80% year to date. In the short squeeze that took place in January 2021, BB stock touched a multi-year high of $36 in intra-day trading.
Similarly, shares of MicroVision have risen from $12.5 on May 13 to $22.58 on June 10. It's currently trading at $20.04 per share. However, once the meme stock mania subsides these stocks will experience a pullback making them vulnerable in the near term.
Keeping this in mind let’s see whether BlackBerry or MicroVision is a better stock right now.
Can BlackBerry Stock Gain Momentum in the Upcoming Months?
BB exited the smartphone market a few years back and has since pivoted towards providing security and software solutions to enterprises. The company provides these services to enterprises primarily in the healthcare and transportation sectors. According to research reports, cybersecurity demand in healthcare is forecasted to grow at an annual rate of 15.6% through 2026, while the transportation security market is expected to grow at a rate of 8% through 2027.
Despite these secular tailwinds, BlackBerry has not performed well and its sales have fallen from $1.04 billion in fiscal 2020 to $893 million in fiscal 2021. Analysts expect sales to decline by another 10% in 2022. BlackBerry is losing market share in rapidly expanding markets.
In positive news, during its last earnings call, BlackBerry claimed that its QNX operating system has been installed in 175 million vehicles. It now provides solutions to 23 of the top 25 electric vehicle OEMs (original equipment manufacturers) including giants such as Volvo.
At the end of fiscal 2021, its cash balance stood at $804 million and it also increased cash flows by 29% to $74 million. This allowed the tech company to reduce debt by $240 million and decrease interest expense by $16 million in the process. Further, BlackBerry’s gross margin has risen by 11 percentage points in the last four years.
Around 90% of software product sales are recurring in nature allowing BlackBerry to derive a stable stream of cash flows as its annual recurring revenue stood at $468 million. It also ended fiscal 2021 with a royalty revenue backlog of $450 million for its QNX product.
MicroVision is Valued at a Market Cap of $3.2 billion
MVIS is a company that develops lidar sensors primarily used in automotive safety and autonomous driving apps. It has a laser beam scanning technology that is based on MEMS (micro-electrical mechanical systems), laser diodes, optomechanics, electronics, software, and algorithms.
It also develops micro-display concepts for the augmented reality of AR headsets in addition to interactive display modules that are used in electronic devices.
In the first quarter of 2021, MVIS sales were down 67% year over year to $500,000. Its net loss widened to $0.04 per share or $6.2 million compared to a net loss of $4.9 million in Q1 of 2020. Wall Street forecasted MicroVision to post sales of $600,000 and a net loss of $0.03 per share in the first quarter of 2021.
However, in 2021, analysts forecast MVIS sales to rise by 34% year over year to over $4 million, valuing the stock at a sky-high price to forward sales multiple of 771x given its market cap of $3.2 billion.
Which is the Better Pick?
The recent rally in BlackBerry and MicroVision shares has no fundamental basis. These companies are still not completely out of the woods and have to tick multiple boxes to win the confidence of long-term investors. However, BlackBerry’s significantly lower valuation and expanding product portfolio make it a better stock compared to MicroVision.
BB shares were trading at $12.91 per share on Thursday morning, up $0.03 (+0.23%). Year-to-date, BB has gained 94.72%, versus a 13.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.
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