BlackBerry (BB) Stock Gets Caution Flags Ahead of Q1 Earnings Report

Shares of software and services provider BlackBerry (BB) have risen nearly 20% year-to-date, as the company’s switch from selling smartphones to selling software and solutions is positively impacting its bottom line. However, that enthusiasm will be tested when the company delivers its first-quarter results for fiscal 2020 on Wednesday, June 26.

The company’s legacy smartphone business is literally dead, so investors should look for it to stabilize its enterprise software and services revenue and sustain its licensing, IP, and other revenue. Looking ahead, management is optimistic about fiscal 2020, guiding for full-year revenue to rise 23% to 27% year over year.

The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock can easily gap down. To help you prepare, RBC analyst Paul Treiber shares his expectations.

“Our outlook calls for Q1 non-GAAP revenue to rise 24% Y/Y (+1% organic), slightly above the Street at $265MM. Excluding Cylance, we expect software & services revenue to grow 10% Y/Y Q1, decelerating from 14% Q4 due to lower IP revenue. For adj. EPS, we expect -$0.01 Q1, slightly below the Street at $0.00, which reflects dilution from Cylance’s high cost base […] Our outlook calls for Cylance to generate $49MM revenue Q1 (in line with the Street), which is flat with the $49MM Cylance reported in its last quarter as a standalone company, as disclosed in the BAR.” Treiber noted.

So, should you buy the stock ahead of the print? Treiber is not so sure.

The analyst believes the stock is trading near fair value, and stronger growth in several of BlackBerry’s core businesses (ESS, BTS, Cylance) is needed to justify material upside for the stock. As such, the analyst reiterates a Sector Perform rating on BlackBerry stock with $10 price target, which implies 18% upside from current levels.

Interestingly, the analyst points out that BB stock has “faded the rally in the week after the quarter in all but 3 of its last 12 quarters,” and he believes “a similar pattern may occur after Q1 results, as we expect Q1 revenue slightly above the Street, but we believe long-term fundamentals would remain unchanged.”

All in all, TipRanks reveals BB as a stock that has not drawn a vote of confidence among Wall Street opinion. Out of 11 analysts polled in the last 12 months, 3 are bullish on BlackBerry stock, 7 remain sidelined, while one is bearish. Wall Street needs to see more from the former smartphone maker before getting more confident on the story. (See BB’s price targets and analyst ratings on TipRanks)


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