Retraction or Addition? “This Tiny Company From Waterloo Just Bet $1.4 Billion on Artificial Intelligence…”

What's the A.I. Stock Being Touted by Motley Fool Canada?

By Travis Johnson, Stock Gumshoe, December 13, 2018

I wrote on Monday about a Motley Fool Canada pitch for an Artificial Intelligence stock, and that tease pointed at one of two smallish tech companies from Canada’s Silicon Valley (Waterloo, Ontario)… I speculated that it was likely OpenText (OTEX) that Stock Advisor Canada was hinting at, given the clues dropped, but today we’ve got either a retraction or an addition to that tease to consider — I’ll let you decide which.

What does that mean? Mostly, just that there’s a new ad today, with a similar theme, that clearly points at the other company I considered.

How’s that for a tease?

Don’t worry, I’ll get to the details… but first, let’s see what the new ad says from the Motley Fool:

“This Tiny Company From Waterloo Just Bet $1.4 Billion on Artificial Intelligence…

“One of the biggest Canadian tech acquisitions of the year was just announced – and the details may shock you…

“… my jaw dropped when news broke of this $1.4 billion acquisition of a breakthrough artificial intelligence company from California.

“Because it was made by a Canadian company that no one on Bay Street is talking about…”

I kinda doubt that “no one on Bay Street” is talking about this stock, it’s been a much-debated company in Canada for decades now (“Bay Street” is the Toronto equivalent of “Wall Street”, for those of you new to Canadian punditry), but we’ll let that slide. What else?

“This monumental deal has yet to officially close – which means there may still be a little time for you to get in before this stock potentially skyrockets.

“Because when this acquisition becomes official, our analysts expect this little Waterloo company’s revenue to balloon… and the share price to soar along with it.”

And the Fool now says they’re offering up a “brand-new report” called “The Artificial Intelligence Arms Race: 1 TSX Stock Hiding in Plain Sight” that explains their investment thesis in this company. That’s a different offer, and an entirely different ad, than the one I covered on Monday… but still, the overall pitch is very similar, that this little Waterloo company is about to surprise everyone with its big strides in Artificial Intelligence.

The stock, however, is clearly different — the new addition of a $1.4 billion acquisition as a hint means that the Foolies today are pitching Blackberry (BB), the other company I considered as a near-match on Monday.

So is this a second AI teaser pitch, just trying to see which ad will get more subscribers? Just an update of their AI pitch with more detail? If the former, this is an additional recommendation — if the latter, it’s time for a retraction as we pull our “OpenText” answer and replace it with “Blackberry.”

And, frankly, I can’t tell you which it is — we do make a mistake about once a year, so I won’t pretend perfection (our standard is 99% accuracy in teaser answers, and we’ve beaten that standard for more than a decade… but I do get them wrong sometimes).

And more importantly, perhaps, we can tell you that Motley Fool’s Stock Advisor Canada has recommended both of these stocks — OpenText they seem to have recommended several years ago for the first time, and Blackberry more recently (likely within the past year). The Motley Fool also owns shares of both stocks… so when it comes down to your assessment, if you’re putting any weight on the Fool’s endorsement, you can still put a check mark next to both.

What does Blackberry look like right now? Well, the stock has had a notably bad year, it’s down almost 50% from its January highs thanks to falling revenue and earnings — though they have beaten analyst estimates for many quarters in a row now. It’s still very much a turnaround story, with hopes that their investments in QNX (self driving cars and car mobile security/infotainment systems) and other mobile security technologies will provide some positive momentum in the years to come, but it’s not yet a justifiable “earnings” story — if analysts are right, they’ll earn about 13 cent per share this year and 15 cents next year, which means the PE ratio is still around 50 and they’re growing revenues at only about 5% a year (maybe 10% now, with the new acquisition… but don’t write that in pen just yet).

And it is heavily owned by a few stock pickers that I respect — no