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As BlackBerry (BB) Earnings Come This Week, How Will Stock React?

support@smarteranalyst.com (Ben Mahaney)

While the beginning of the week features Apple is making news with a release of new services, the end of the week will turn the spotlight on one-time rival Blackberry (BB), as the company is slated to release fourth-quarter earnings on Friday.

Last quarter, BlackBerry’s release was met with mixed reactions, as the company showed better profit but lower revenue but investors are hoping and expecting better results this time around.

Ahead of the announcement, RBC Capital analyst Paul Treiber is maintaining his Sector Weight (i.e Hold) rating on BB stock with a $10 price target, which implies nearly 13% upside for the stock. (To watch Treiber's track record, click here)

As BlackBerry is calling for positive revenue growth between this year and last, Trieber agrees, estimating an “increase 4% Y/Y, which represents the first quarter of positive Y/Y growth in ~6 years.” While Wall Street expects revenue at $242 million, the analyst expects $249 million, with “software & services revenue to rise 11% Y/Y to $243MM, which equates to 87% of total revenue.” On earnings per share, the analyst and the Street agree at $0.06.

A big piece of news out of Waterloo earlier this year was Blackberry’s closing of cybersecurity firm Cylance. Treiber says he believes “BlackBerry is likely to provide an outlook for Cylance, which would align with its prior comments and investor expectations. Specifically, management indicated that it paid “less than 7x forward revenue” for Cylance, which implies $203MM forward revenue, up 45% from $140MM trailing revenue.” The analyst’s outlook “assumes Cylance contributes $178MM FY20E, based on 20% post-acquisition deferred revenue writedown and sustained 45% revenue growth.”

Within BlackBerry, there has been changes to upper management, “likely in an attempt to improve execution and growth, says Treiber. These changes seem to have provided some help to BlackBerry, as its stock is up 24% since Q3 results in December, and is “currently trading at 4.3x FTM EV/S, up from 3.1x in December, and essentially in line with enterprise security peers at 4.3x and its 2-year historical average (4.5x).”

The Wall Street community is mixed on BlackBerry, as the stock has been on a tear since the beginning of the year. Many investors are happy to see the company transformed itself from a phone maker to enterprise software, but others still have some concerns preventing them from pulling the trigger. TipRanks analysis of four analyst ratings shows a consensus Hold rating, with one analysts recommending Buy, two Holding and one selling. There is an average price target of $10.33, representing a 17% rise from current levels. (Click here to see BB’s price targets and ratings on TipRanks)

 

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