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Why Is BlackBerry (BB) Down 2.3% Since Last Earnings Report?

Zacks Equity Research
·3 min read

A month has gone by since the last earnings report for BlackBerry (BB). Shares have lost about 2.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is BlackBerry due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

BlackBerry Q1 Earnings Beat Estimates, Revenues Fall Y/Y

BlackBerry reported decent first-quarter fiscal 2021 (ended May 31, 2020) results, with adjusted earnings beating the Zacks Consensus Estimate. The cybersecurity software and services company is capitalizing on the secular trends of securing and connecting endpoints.

In the quarter, BlackBerry QNX was impacted by macro headwinds in the auto and other embedded sectors. On the enterprise front, the company saw healthy demand for BlackBerry’s security, business continuity and productivity solutions in a remote working environment.

Bottom Line

On a GAAP basis, net loss in the quarter was $636 million or loss of $1.14 per share compared with a net loss of $35 million or loss of 9 cents per share in the prior-year quarter. The deterioration was mainly caused by higher operating loss.

However, non-GAAP net income in fiscal first-quarter came in at $12 million or 2 cents per share compared with $5 million or 1 cent per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.

Revenues

Quarterly total GAAP revenues declined 16.6% year over year to $206 million. This was primarily due to lower software and service as well as licensing revenues. Non-GAAP revenues in fiscal first-quarter dropped 19.9% to $214 million. However, the top line surpassed the consensus estimate of $209 million.

Other Details

Gross profit fell to $143 million from $177 million in the year-ago quarter, primarily due to lower revenues. Total operating expenses increased to $788 million from $213 million. This was caused by a non-cash, one-time goodwill impairment charge of $594 million. Operating loss was $645 million compared with a loss of $36 million in the prior-year quarter.

Cash Flow & Liquidity

In first-quarter fiscal 2021, BlackBerry utilized $31 million of net cash in operating activities compared with a cash utilization of $64 million in the year-ago quarter. As of May 31, 2020, the company had $312 million in cash and equivalents with $111 million of operating lease liabilities compared with the respective tallies of $377 million and $120 million at the end of the prior quarter.

Outlook

Due to uncertainties stemming from the COVID-19 pandemic, BlackBerry did not provide a financial outlook for fiscal 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 44.44% due to these changes.

VGM Scores

At this time, BlackBerry has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, BlackBerry has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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