BlackBerry's (BB -1.43%) stock started the year at $6.58 per share, but it hit a nine-year high of $25.10 on Jan. 27. The stock subsequently retreated to the mid-teens, but still remains up nearly 140% for the year. Let's see why this battered tech stock suddenly attracted so much interest, and where it could be headed from here.

These developments lit a fire under BlackBerry's stock

BlackBerry's rally started in early December after the company announced a partnership with Amazon (AMZN -2.56%) Web Services (AWS) to co-develop IVY, a new cloud-based automotive platform based on its embedded operating system QNX.

BlackBerry's stock jumped again in mid-January after it sold some of its older patents to Huawei and settled its patent infringement lawsuit against Facebook (META -4.13%). BlackBerry initially sued Facebook and Snap back in 2018, claiming their apps infringed upon its mobile messaging patents.

A trader checks a stock chart on a smartphone.

Image source: Getty Images.

On Jan. 25, BlackBerry announced another automotive deal with Chinese tech giant Baidu (BIDU -0.56%), which will integrate QNX into Baidu's maps in forthcoming electric vehicles from GAC Group.

BlackBerry didn't reveal how much money it received from any of those deals, but they clearly got the market's attention. The Reddit-fueled short squeezes, which recently lifted GameStop and other shorted stocks to all-time highs, then brought even more speculators to BlackBerry, Nokia, and other unloved stocks -- even though only 7% of BlackBerry's shares were being shorted at the beginning of the year.

Where does BlackBerry go from here?

BlackBerry's stock might have rallied, but the company's underlying fundamentals remain the same.

Under CEO John Chen, who took the helm in late 2013, BlackBerry phased out its hardware business, licensed its brand to third-party smartphone manufacturers, and expanded its software and services business. It also aggressively sued other companies to boost its patent licensing revenue.

BlackBerry's revenue rose 15% in fiscal 2020, which ended last February, but most of that growth came from its acquisition of the cybersecurity firm Cylance and higher patent licensing revenue.

An IT professional checks a tablet.

Image source: Getty Images.

In the first nine months of 2021, BlackBerry's revenue declined 10% year over year to $683 million after it lapped those gains. Its QNX revenue also plunged as the pandemic disrupted the auto industry.

Its net loss widened from $111 million to $789 million during that period, mainly due to a hefty goodwill impairment charge. But its adjusted EBITDA -- which excludes that charge, its stock-based compensation, and other expenses -- rose 63% to $132 million.

That bottom-line growth was mainly supported by an increase in its high-margin licensing revenue. Analysts expect BlackBerry's revenue to decline 14% for the full year, but for its adjusted EPS to rise 39%.

Next year, they expect its revenue to rise 9%, presumably as the auto sector recovers and its Spark suite of security services gains more customers. But its adjusted earnings are still expected to slide 17% as its licensing business faces tough year-over-year comparisons.

Based on those forecasts and the stock's current price of around $15 a share, BlackBerry trades at nearly 100 times forward earnings and eight times next year's sales. Those valuations might be reasonable for a high-growth cloud stock, but BlackBerry's uneven growth doesn't justify those premium valuations.

Beware of BlackBerry's hype

BlackBerry has a habit of dressing up old deals like new ones, then obfuscating the actual financial benefits.

For example, BlackBerry's AWS announcement last December was merely an update of a project that had been revealed nearly a year earlier. In the fine print of its latest SEC filing, BlackBerry says IVY-powered vehicles won't actually start shipping or generating any meaningful revenue until fiscal 2023. Its work with Baidu is also merely an extension of a previous driverless partnership.

BlackBerry didn't reveal its exact financial expectations for either deal, and the only visible benefit is the installation of QNX in new vehicles -- which isn't game-changing, since it's already the dominant OS in new cars.

It's also odd that BlackBerry didn't reveal any details about its long-awaited settlement with Facebook. That lack of clarity is frustrating, since BlackBerry generated nearly a third of its revenue from its "licensing and other" segment in the first nine months of 2020, and it needs the business to keep growing to boost its margins and earnings.

Based on those facts, I suspect that none of BlackBerry's big announcements since December will meaningfully boost its revenue in fiscal 2021 or 2022.

It's time to take profits

At this point, BlackBerry's investors shouldn't look a gift horse in the mouth. A combination of hype and a market-wide short squeeze boosted this stock's price to double-digit levels again, but these gains are unsustainable.

BlackBerry isn't doomed yet, but its core business still faces significant challenges from other cybersecurity companies, and its licensing business will eventually run out of companies to sue and patents to sell. Therefore, investors should take profits in BlackBerry now instead of waiting for lightning to strike twice.