Vodafone Gives BlackBerry (TSX:BB) Stock a Huge Vote of Confidence

Vodafone Group (NASDAQ:VOD) just signed an agreement to launch BlackBerry Ltd. (TSX:BB)(NYSE:BB) products to secure its internal data.

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Vodafone Group (NASDAQ:VOD) made a big move last week when it chose BlackBerry Ltd. (TSX:BB)(NYSE:BB) to protect critical internal data. It’s a vote of confidence as BlackBerry looks to secure bigger partners for its new cybersecurity software products.

In a press release, the companies announced an “expanded partnership with Vodafone to offer BlackBerry AtHoc as its emergency alert and crisis communications solution.”

The reason Vodafone chose BlackBerry was simple: security. “We are delighted to add BlackBerry AtHoc to our portfolio of security solutions. It will help customers such as Greater Manchester Police and Fire connect with their frontline staff quickly and securely,” a Vodafone representative said.

This may seem like a one-off announcement, but it’s not. Deals like this suggest big things ahead for BlackBerry stock.

A whole new world

BlackBerry isn’t the company it used to be. In 2008, it held a 20% global market share for smartphones. Today, that share is close to 0%. In fact, the company didn’t product a single phone last year.

If BlackBerry isn’t a phone company, what exactly does it do?

As the Vodafone deal shows, the company has already gained promising traction for its new business: cybersecurity software. It has spent years developing one of the best product suites in the industry. Its Cylance division, for example, uses artificial intelligence to detect and thwart attacks before they occur!

Capabilities like Cylance are integrated in all of BlackBerry’s products. It has solutions for the internet-of-things, big data, healthcare, self-driving vehicles, enterprise security, and much more. BlackBerry can protect any device that’s vulnerable to hacking.

Vodafone isn’t the only deal in place. The company’s QNX platform is already installed in nearly 200 million cars worldwide. This tech stock has been making continuous progress launching its software, but as we’ll see, the market has been slow to reward this traction.

BlackBerry stock is ready

What would you pay for a tech stock that owns some of the most advanced cybersecurity software in existence? Let’s take a look at the peer group. Crowdstrike trades at 38 times sales. Palo Alto Networks trades at 7.5 times sales. ANSYS Inc trades at 18 times sales.

This peer group is pricey, but for good reason. Cybersecurity products have fantastic margins, high retention rates, and are benefiting from multi-year growth tailwinds. The number of connected devices proliferates on a daily basis. Billions of new endpoints need to be secured every year. This is simply one of the biggest opportunities this decade.

Where does BlackBerry stock stand in all of this? Shares trade at just 3 times sales! That’s a 70% to 90% discount to the industry.

This discount likely stems from two factors. First, the market hasn’t caught on to BlackBerry’s new business model. Many investors still view the company as a hardware manufacturer. Second, BlackBerry is at the start of its sales launch. That means early investors can take advantage of the risk-reward balance.

As sales ramp, expect the valuation discount to narrow quickly. That could lead to 500% upside or more. Early investors in BB stock will experience the most long-term upside.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool owns shares of and recommends Palo Alto Networks. The Motley Fool recommends BlackBerry and BlackBerry. Fool contributor Ryan Vanzo has no position in any stocks mentioned.

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