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Is the Blackberry (BB) share price about to explode?

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The Blackberry (NYSE: BB) share price is up by 30% in five days. This tech stock has been the fourth-most traded stock on UK broker platform Hargreaves Lansdown over the last week.

Blackberry’s share price has risen by 170% over the last 12 months as the firm’s turnaround has gathered pace. The former smartphone maker has pivoted into cybersecurity and announced a partnership with Amazon last year. Brokers expect a return to profit next year. Should I start buying BB stock?

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This ain’t no start-up

Blackberry isn’t a start-up with big hopes and few customers. This business generated revenue of nearly $900m last year and is expected to return to profitability next year.

Key products include the group’s Spark suite of cybersecurity products, and QNX. This is an operating system that installed in more than 175m vehicles worldwide and is also used in other automation environments.

Analysts are bullish on the outlook for the business. The latest consensus forecasts show Blackberry generating a $60m net profit next year. That figure is expected to triple to $182m the following year.

I think the company could be on the verge of a winning streak.

Facing tough competition

Of course, Blackberry isn’t a sure thing. A growing number of companies are applying artificial intelligence techniques to cybersecurity. One interesting example is Darktrace, which recently listed on the London market.

Another risk is that in my experience, it’s quite rare for companies to reinvent themselves successfully. More often, they tend to fall short and get left behind by newer businesses with less baggage.

So far, I have to admit that I’m impressed with Blackberry’s progress. But this business is still losing money and its cash balance has been falling. Even if this business does turn profitable next year as expected, is Blackberry’s surging share price already up with events?

Blackberry share price: what I’d do

If Blackberry becomes the next big meme stock, then I think the share price could rise quickly and unpredictably. I can’t predict how this might go.

What I can say is that the Blackberry share price already looks fully priced to me, based on investment fundamentals. Putting this into numbers, BB stock currently trades on 200 times 2022/23 forecast earnings. This multiple falls to 49 times earnings in 2023/24.

If Blackberry’s earnings meet broker forecasts and continue to grow strongly in 2024/25, then I think the shares could start to look quite affordable.

The problem for me is that situation might be three or four years in the future. Given Blackberry’s mixed track record, I don’t feel comfortable paying for so much growth in advance.

My verdict on Blackberry’s share price? For me, the stock is already high enough. The only reason I can see to buy Blackberry today is that the stock could surge on a wave of retail trading. That’s too speculative for me, so I won’t be buying.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended BlackBerry and Hargreaves Lansdown and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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