North America

Earnings Preview: BlackBerry Q2 2018 (BBRY)

By: Craig Bowles

Overview

BlackBerry Limited (BBRY) is slated to report 2Q 2018 earnings before the bell on Thursday, September 28th. The earnings release is expected at approximately 7:00 a.m. ET followed by an 8:00 a.m. conference call available at BlackBerry Investor Relations. The company was formerly known as Research In Motion Limited and changed its name to BlackBerry Limited in July 2013. Turnaround specialist John Chen became CEO in November 2013.

Outliers & Strategy

Key measures:

  • Adjusted/Non-GAAP Earnings Per Share (EPS): The Street estimate is $0.00 with a range of $(0.03) to $0.05. (source: Yahoo! Finance). Analyst consensus was $0.00 three months ago, as well.
  • Earnings Per Share (EPS): If an Adjusted EPS figure is not available, this value would compare with forecasts.
  • Revenues: Analysts expect $221.18 mln (range $207.30 mln to $231.87 mln).
  • Adjusted Earnings Per Share (EPS) Guidance for FY2018: Guidance is “to be profitable on a Non-GAAP basis and generate positive free cash flow.” Analysts expect $0.04 with a range of $(0.01) to $0.18.
  • Price/Book of 1.9 compares to a 5-year average of 1.1; Price Sales of 4.6 compares to a 5-year average of 1.1.
  • Analysts view BlackBerry with 4 (was 2 nine months ago) Buy, 10 Hold, and 2 Sell ratings (source: MarketBeat.com).
  • On June 23, 2017, BlackBerry announced plans to buy back 31 million shares or 6.4% of the public float.
  • BlackBerry shares have a 1-day average price change on earnings of 7.06%. Options are pricing in an implied move of 9.63% off earnings.

Recent News

  • 09/15: BlackBerry is down 28% after a rally earlier in the year, which was caused by a solid quarter and in part due to the release of a bullish analysis by Citron Research. Although investors were excited about BlackBerry’s QNX, which is a cutting-edge operating system with many potential applications, including fleet-tracking radar services and self-driving cars, the speculative nature of self-driving cars suggests that the company has made a turnaround but that opportunity for investors are more long term, according to a post on Fool.com.
  • 09/13: BlackBerry Limited and Timex Group announced they have entered into a patent license agreement. The financial structure of the deal includes on-going royalty payments from Timex to BlackBerry.
  • 09/12: BlackBerry announced that the BlackBerry Enterprise Mobility Suite was updated to fully support Apple’s newly launched iOS 11 mobile operating system, achieving day zero readiness to reinforce the confidence in BlackBerry Secure.
  • 08/24: BlackBerry announced that it’s Keyone, which initially launched as a Sprint exclusive in the United States, is available through AT&T starting on September 1, according to a post on 9to5google.com.
  • 08/24: BlackBerry announced it is in talks with various global smartphone makers to provide its version of a secure Android operating system under a licensing deal as part of the second phase of its licensing strategy. The agreements, which grant mobile distributors the exclusive rights to design, manufacture and sell its smart phones, include Optiemus in India, Bangladesh, Nepal and Sri Lanka, BB Merah Putih for the Indonesian market and China’s TCL for rest of the global markets, according to a post on IndiaTimes.com.
  • 08/07: Goldman Sachs initiated coverage of BlackBerry with a Sell rating on the belief that the future opportunity from autos is dampened by enterprise mobility risks. Sees risks to performance in H2 and does not expect any material contributions from automotive over the next 1.5 years, according to a post on StreetInsider.com.

Technical Review

BlackBerry has mostly traded between $6 and $12 since late 2013 but spent over a year on the low side. 2017 got as high as $11.74 before a positive retest of the 200-day moving average. The stock had previously found a lot of support just above $9, so that’d be a conservative positive until these annual revenue declines come to a halt. Stock buyback plans should give the stock support in the meantime. (Chart courtesy of StockCharts.com).

Summary

BlackBerry revenue continues to shrink but analysts have faith in CEO Chen and suggest the company could be the next NVIDIA (NVDA). BlackBerry is positioning itself to be part of the self-driving car revolution but that industry is of longer-term potential. Security is in higher demand than ever, however. The company has beaten earnings estimates by an average of 4c the past four quarters. Estimize consensus for earnings of $0.01 on revenue of $232.65 mln compares to analyst consensus of $0.00 on revenue of $221.18 mln.

 

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