Stock Analysis & Ideas

BlackBerry: Disappointing Outlook Keeps This Top Analyst on the Sidelines

BlackBerry’s (BB) struggling business showed no signs of a meaningful turnaround in the software maker’s latest financial report – for fiscal fourth-quarter.

While the company did manage to post a beat on the bottom-line as adj. EPS of $0.01 came in above the Street’s call for -$0.03, it didn’t manage to meet expectations on the top-line; Revenue not only dropped year-over-year by 12% to $185 million but the figure also came in below the analysts’ $187 million forecast.

While the IoT segment’s revenue increased from $38 million in the same period last year to reach $52 million, cybersecurity revenue – the company’s largest revenue generator – clocked in at $122 million, basically the same as last year’s haul.

The bad news is, looking ahead to fiscal 2023, the company expects cybersecurity revenue to stay the same again. Additionally, BlackBerry guided for “minimal” licensing revenue in F2023.

With the overall revenue guidance for the upcoming fiscal year at ~$682 million, it is also fell short of Canaccord’s Michael Walkley’s $760 million estimate.

While Walkley is “encouraged by improving billings,” the “increased churn in Cybersecurity and slower than anticipated growth in IoT” are why he has lowered F2023 and F2024’s estimates – from $760 million to $682 million and $831 million to $736 million, respectively.

Looking at the bright side, the company has suggested the sale of the licensing business is “on track” to possibly close by the end of Q2F23, and Walkley thinks that could be timely, given the boost it might give the business. “We believe proceeds from the sale provide an initial $450M capital infusion to drive accelerated software and services growth both through ongoing investments and potential acquisitions,” the analyst explained.

However, for Walkley to become “more constructive on the shares,” the 5-star analyst awaits “more proof in execution on the new cybersecurity product roadmap, evidence of cross-selling opportunities emerging and growing software and services revenue.”

For now, then, Walkley’s rating stays a Hold. His $7 price target is roughly the same as the shares’ current price. (To watch Walkley’s track record, click here)

The rest of the Street is on the same page. BB’s Hold consensus rating is based on 3 Holds and 2 Sells. At $6.50, the average price target suggests shares will fall ~8% in the year ahead. (See BlackBerry stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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