BlackBerry (BB) managed to spring a surprise on Wall Street when it delivered FQ322’s financials after the market closed on Tuesday. The software maker posted beats on both the top-and bottom-line.
Non-GAAP EPS of $0.00 beat the consensus estimate by $0.07 and although revenue dropped by 18% from the same period last year, at $184 million, the figure came in 7.42 million above the analysts’ forecast. The beat was on account of improving IoT revenue, which hit $43 million, and a 7% sequential increase to cybersecurity revenue, which came in at $128 million.
Canaccord’s top analyst Michael Walkley attributes the latter’s strong performance to a bigger contribution from Secusmart and an “improving uptake of the broader portfolio due to sustained investments in quota-bearing sales reps and channel partners.”
Despite the beat, the total revenue drop can be put down to licensing revenue declining from $56 million in F3Q21 to $13 million in FQ322. This is because the company is still negotiating the potential sale of its patent portfolio to an as-yet-unknown North American company.
Regarding the licensing business, Walkley notes the tone on the earnings call was “incrementally positive,” with management suggesting the sale should close in January as the two parties have already agreed on a price.
While Walkley has removed $10 million in licensing revenue from his Q4 estimates, he believes the sale could “help unlock value and provide a capital infusion to drive accelerated software and services growth.”
However, despite expecting software and services “fundamentals” to improve throughout F2023, Walkley thinks there’s still much work to do to confirm a real turnaround is at play.
“While management has created a cogent long-term strategy and the business is turning the corner toward improving growth trends, we await more proof in execution on the new cybersecurity product roadmap, evidence of cross-selling opportunities emerging, growing software and services revenue, and the potential for upside to our estimates before becoming more constructive on the shares,” the 5-star analyst explained.
As such, Walkley sticks to a Hold rating and $10 price target, indicating room for 6% upside from current levels. (To watch Walkley’s track record, click here)
Interestingly, Walkley’s take is as bullish as the Street gets. The analyst consensus views the stock as a Moderate Sell, based on 2 Holds and 3 Sells. Going by the $8.95 average target, shares will experience a modest 6.5% decline from current levels. (See BlackBerry stock analysis on TipRanks)
See what top Wall Street analysts say about your stocks >>
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.
