BlackBerry stock has plunged 35% from the YTD high: buy the dip?

BlackBerry stock price has pulled back in the past two weeks in New York and Toronto. It dropped to $8.83 on Monday, down by 35% from its highest point this year. Even so, it is one of the best-performing stocks as it jumped by over 130% this year as investors cheer its turnaround and its positioning in the AI and robotics market.

BlackBerry’s business is doing well this year

BlackBerry, a company that once played a big role in the smartphone industry, has done well in the past few months as the turnaround efforts by John Giamatteo continued paying off. 

This recovery has been helped by its QNX business, which provides a real-time operating system used in connected and autonomous vehicles. Its system is now embedded in over 275 million vehicles.

At the same time, investors believe that it is one of the top players in the AI and robotics market, especially after its partnerships with companies like Nvidia, Qualcomm, and Arm.

BlackBerry stock jumped after it reported upbeat first-quarter results, indicating its business was doing relatively well. Its revenue jumped by 26% to $152.9 million, with its gross margin growing by 4 percentage points.

The company’s growth was largely driven by its QNX segment, whose revenue rose by 26% to $72.3 million. QNX expanded its partnership with Nvidia to advance safety-critical AI across robotics, medical, and industrial systems.

Its secure communications revenue soared by 24% to $73.6 million. BlackBerry made $7 million from licensing.

The company reached several major milestones in the quarter, including achieving FedRAMP Class D recertification for the BlackBerry AtHoc solution.

This certification will strengthen its position for US government contracts.

Valuation and growth concerns linger

Still, there are concerns about BlackBerry shares. One of the key concerns is whether it can sustain its organic growth.

Yahoo Finance data shows that its second-quarter revenue will come in at $145.53 million, up by 12.2% from the same period last year. This will mark a deceleration from the previous quarter.

For the year, the company’s revenue is expected to be $614 million, up by 12% YoY. It is then expected to hit $678 million next year, up by 10% YoY. 

Another concern, which may explain the recent pullback, is valuation. The stock has become expensive after this year's rally.

Data shows that the forward price-to-earnings ratio has moved to 78, much higher than most companies, including popular names like Nvidia and Micron. 

BlackBerry stock price technical analysis

BB stock price chart | Source: TradingView

The weekly chart shows that the BB stock price has pulled back in the past few days, moving from a high of $13.57 to the current $8.83. 

This retreat is happening as investors book profits after the stock surged from last year’s low of $1.96 to a high of $13.57. It remains substantially above the 50 and 200 moving averages.

Therefore, there is a risk that mean reversion will pull it much lower in the near term. If this happens, the stock will drop towards the 50 EMA level of $5.9 as traders wait for its second quarter earnings report.

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