It may have been the name that ushered in the era of smartphones, but BlackBerry (NYSE:BB) has been conspicuously missing from the industry's landscape for years. Indeed, it stopped making phones altogether in 2016, succumbing to powerhouses like Apple, and instead focusing entirely on software, security, and mobility solutions.

The market bought into the idea, but only for a while. After peaking in early 2018, the stock's since given up more than half of its value. The $3 billion in cash and other liquid assets on the company's books as of early 2016 has been whittled down to last quarter's tally of $1.1 billion, mostly thanks to acquisitions that aren't necessarily paying off in a big way.

Man's hand pointing to a tablet with linked lock icons superimposed over the image

Image source: Getty Images.

While the deal-making has proven less than successful, the stock's pullback over the course of the past couple of years has dramatically changed BlackBerry's risk profile. It's still not for everyone, but for investors willing to stomach a little uncertainty, there's a new bullish argument to be made.

Beaten down to a better value

The headlines are admittedly alarming. COO Bryan Palma announced last week he'd be stepping down after less than a year on the job, leaving investors wondering if he's jumping off of a sinking ship. That news surfaced following September's disappointing second-quarter report, which featured slowing sales growth and an operating loss of $43 million. In the same quarter a year earlier, BlackBerry booked an operating profit of $39 million.

The fiscal lethargy wasn't anything unusual. Neither was the post-earnings weakness in the stock.

Bank of America analyst Daniel Bartus made a good point a week ago, though, when he noted the stock's current price near $5 means the potential for more selling is "limited," while there's "substantial upside" potential for a rebound. His conclusion? The stock's no longer deserving of an underperform rating and a target price of $6. Rather, Bartus upped his target price to $7, and now rates BlackBerry shares at neutral.

It's hardly a screaming bullish thesis, but Bartus' willingness to give the organization a little credit mitigates much of the perceived risk, and lets investors better appreciate the deeper underpinnings of what BlackBerry could be. 

Patents, technology ready for prime time

BlackBerry's trajectory may look and feel like it's pointed lower, but the long-awaited turnaround may be at hand. That makes the beleaguered company a compelling prospect for investors and prospective suitors alike.

"If you're playing the development of the electric vehicle, of autonomous vehicles and the security that you're going to need once 5G comes and you're going to have car-to-car discussions through technology, you need security," said Middlefield Capital's Rob Lauzon earlier this year, alluding to BlackBerry's QNX arm. He added, "So BlackBerry could be a takeout target."

It's not just the advent of connected, self-driving cars that BlackBerry is coasting into, either. Although it was a bit self-serving, BlackBerry CEO John Chen explained in September that the number of cyberthreats to automobiles and mobile devices means the company's products and services may finally be able to reach the full potential envisioned years ago. All told, Chen says he's looking for revenue growth of between 23% and 27% this year, which isn't a stretch. The company's IP licensing revenue of $71 million last quarter was up nearly 27% from the year-earlier figure of $56 million. That's still about half of Cylance's revenue contribution, but licensing and royalty revenue is generally high-margin revenue, and the unit is one of the company's bright spots.

Chen didn't clarify how much of that would be driven by deal-making and how much would be produced organically. But given the company is allocating nearly one-fourth of revenue toward research and development -- and adding that work to its 44,000 patents -- perhaps investors have presumed the worst at the exact wrong time.

Investor takeaway

Again, no investor can afford to blindly count on an acquisition. Corporations like companies for the same reason investors do, though -- that is, organic growth. One way or another, the market eventually rewards it. BlackBerry has had little of it for a while, but investors have shunned the stock, perhaps without realizing this year and next year could be quite vindicating. Analysts haven't made the same mistake, however. The consensus price target now stands at $7.65, which is 38% better than shares' current levels.

Graph showing BlackBerry's actual and forecast revenue and income over the past six years

Data source: Thomson Reuters. Chart by author.

It's still not the kind of blue chip name grandma needs in her retirement portfolio, but for investors with time and tolerance to spare, it's a compelling pick, despite the risks.