BB:CC - The 1 Canadian AI Company I'd Buy Over BlackBerry Stock
2023-06-28 17:30:00 ET
The rebound in tech stocks in 2023 amid a high-interest rate era was unforeseen. Market analysts predicted last year’s sell-off to carry over but a long-hyped technology, artificial intelligence (AI), saved the day. As of this writing, information technology is TSX’s best-performing sector, with its 33.8% positive return.
According to Grand View Research, the AI market size of US$136.6 billion in 2022 would expand at a compound annual growth rate (CAGR) of 37.3% from 2023 to 2030. It adds the industry is rapidly growing because AI has brought technology to the center of many organizations.
Multi-awarded AI company
Waterloo-based BlackBerry ( TSX:BB ) boasts the most mature cybersecurity AI model and won eight cybersecurity excellence awards out of eight categories early this year. The sweep put BlackBerry back on investors’ radars. At $6.30 per share, the year-to-date gain is 42.9%.
The $3.7 billion company is also famous in the automotive industry for its foundational software for vehicles. Its Executive Chairman and CEO, John Chen, said BlackBerry is the market leader for secure and safety-certified automotive software.
Technology analysis and market research firm TechInsights confirm that BlackBerry QNX software is now embedded in over 235 million vehicles worldwide. The year-over-year volume increase was 20 million vehicles (9.3%). In fiscal 2023, the royalty backlog for QNX reached a record US$640 million.
Roger C. Lanctot, TechInsights’ Director of Automotive Mobility, said, “BlackBerry’s continued dominance in the automotive market is a testament to the ingenuity and versatility of QNX in the context of an evolving market and application space.”
BlackBerry leverages AI and machine learning to deliver innovative solutions, including cybersecurity, safety, and data privacy. It also covers endpoint security, endpoint management, encryption, and embedded systems. Management said the opportunity in endpoint security (US$10.9 billion) and market security services (US$41.2 billion) markets is large and growing.
While fundamentals look healthy and growth catalysts are plenty, I have reservations about taking a position in this AI stock. In the 12 months that ended February 28, 2023, net loss reached US$734 million versus the US$12 million net income in fiscal 2022. Also, BlackBerry incurred losses in 9 of the last 10 years.
I want to invest in an AI stock but not BlackBerry. I prefer another Canadian company that has been profitable in the last four years.
First choice
OpenText ( TSX:OTEX ) is my first choice in the AI space. At $52.76 per share, current investors enjoy a 33.2% year-to-date return on top of a modest 2.47% dividend. This $14.3 billion growth-oriented company, also from Waterloo, designs, develops, and markets information management software and solutions.
Unlike BlackBerry, profit isn’t elusive for Open Text. The average net income from 2019 to 2022 is US$306.8 million. In Q3 fiscal 2023, total revenues and annual recurring revenues (ARR) rose 41.1% and 37.7% to US$1.2 billion and US$1 billion, respectively. Management said it was the ninth consecutive quarter of cloud and ARR organic growth.
The acquisition of Micro Focus, a leading provider of mission-critical software technology, allows Open Text to execute its Total Growth Strategy.
Profitability is paramount
I would recommend buying BlackBerry only if it reports profits in the coming quarters. Meanwhile, I expect Open Text to sustain its upward momentum because of it strong, consistent earnings.
The post The 1 Canadian AI Company I’d Buy Over BlackBerry Stock appeared first on The Motley Fool Canada .
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
2023