Is cybersecurity focussed BlackBerry or CRM leader ServiceNow a better investment in the expansive market of digital business solutions?
In the expanding world of interconnected devices, digital solutions, and cybersecurity two names currently stand out from the crowd. Thus, we ask which is a better investment right now; the once-popular BlackBerry (NYSE: BB) or the current market sweetheart ServiceNow (NYSE: NOW)?
The bull and bear case for BlackBerry
BlackBerry, a company many of us know from the early2000ss, was the producer of one of the most prominent smartphones in the world. Yet, these days BlackBerry does not sell hardware, but rather its primary focus is now providing cybersecurity software along with other services for interconnected devices.
This switch was instigated by its CEO, John Chen once he was appointed back in 2013. Today, the company’s clients include Baidu and Amazon Web Services (AWS). Indeed, it is also currently collaborating with AWS to build a large cloud-based platform for the EV industry to utilize. This platform will allow automakers to remotely read vehicle data and create actionable insights. This is a promising step forward for a software company that is competing in a field full of software giants.
The rise of a remote working environment has been an opportunity for BlackBerry as businesses have switched to cloud computing and demand for suitable operating software and cybersecurity products have risen alongside it. The Internet of Things (IoT) and cybersecurity are two key markets for BlackBerry, showing that the company has a visible growth runway.
BlackBerry is also a meme stock. However, this status has been primarily driven by the surprise that the company is still operational. There is not much need to ‘save’ this company from short-sellers as just over 7.5% short interest as of 14 June, this is not really at a meme stock level.
Yet, investors should keep an eye on BlackBerry’s decline in revenue. In its most recent quarter, it reported a 16% decrease year-over-year (YoY) as well as a net loss of $62 million. The revenue loss was expected, however, and BlackBerry did actually manage to beat consensus estimates, whilst the net loss was a marked improvement on the year prior which came in at $636 million.
The bull and bear case for ServiceNow
ServiceNow shares saw an increase of 16% over the month of June at time of writing. This was boosted by a couple of positives for the company. Firstly, Goldman Sachs added the company to its list of ‘conviction’ stocks which essentially means that the bank firmly believes in the success of this company. An analyst from the firm stated that ServiceNow could triple its revenue over the next few years due to the new online working environment that was accelerated by the pandemic. Additionally, for the second year in a row, ServiceNow was named as a leader in customer relationship management by the 2021 Gartner Magic Quadrant.
The company’s financials are also still looking very strong and stable. In its most recent earnings, the CRM company reported earnings per share of $1.52, which surpassed estimates and were up more than 30% YoY. It also brought in revenue of $1.32 billion of the quarter, up 30% YoY. With 1,146 customers and an annual renewal rate of 97%, this company is hugely successful.
However, since June’s run, many feel the stock is overvalued and a pull-back does not seem to be shaping up any time soon. This means that many new investors might not want to invest in the company just yet until there is more of a pullback on price.
Furthermore, ServiceNow is a large-cap company, and therefore, its growth momentum is slowing down. As one of the largest SaaS companies in the world, its revenue growth rate was around 59% annually. For 2021, it anticipates around 28% growth with revenue coming in at $5.4 billion. As such, the stock will again become overvalued, spooking many future investors. Overall, this would be a slow but safe investment.
So, which is a better investment?
Whilst both BlackBerry and ServiceNow are excellent candidates for an investment, there is not much more ServiceNow can do other than to continue doing what it is doing. This will ensure that the company will grow, albeit at a slower pace than previous years, but it is an altogether safe investment.
BlackBerry on the other hand is a bit more exciting, with plenty of runway for growth in the key markets of the IoT and cybersecurity. BlackBerry also has the improving fundamentals to sustain its growth for the long term. Although it is a tad risker than ServiceNow, this stock is the better option for high growth opportunities.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.