Long gone are the days when a BlackBerry (BB) phone would make an ideal Christmas gift, although investors will be looking for some degree of holiday cheer when the once leading smartphone maker turned software specialist reports Q3FY22’s (November quarter) financials today after market close.
That said, according to RBC’s Paul Treiber, a lid should be kept on any expectations of an early Christmas present.
While new sales investments should provide “some incremental improvement,” the analyst expects year-over-year revenue growth to stay negative. Treiber sees Q3 revenue declining by 21% from the same period last year to $177 million, in line with Wall Street’s expectations. On the plus side, higher Cyber Security and IoT revenue should lead to 1% sequential revenue growth. However, an uptick in opex will see adj. EBITDA drop to -$33 million, below the consensus estimate of -$23 million, and declining from the -$14 million exhibited in Q2. The result will be adj. EPS of – $0.09, worse off than Q2’s -$0.06 and consensus expectations of -$0.07.
In any case, the 5-star analyst believes the quarter’s results will once again be “overshadowed” by developments regarding the sale of the company’s patent portfolio.
On Q2’s earnings call, management said that as negotiations (due diligence, pricing) were “largely finalized,” there was an 80% chance the patent portfolio’s sale would close in Q3. However, the company has remained silent on the matter throughout the quarter and Treiber says an update will be forthcoming.
According to Treiber, the patent portfolio is worth $1 billion. “Proceeds on the sale materially above or below our estimate may have a significant impact on BlackBerry’s shares, given the size of the portfolio ($1B = 28% of BlackBerry’s EV),” the analyst said.
Despite shares pulling back significantly from the year’s early highs, BlackBerry’s status as a meme stock favorite has ensured year-to-date gains of ~40% and Treiber still sees a “disconnect between valuation and fundamentals.”
As such, the analyst rates BB stock as Underperform (i.e., Sell) and attaches a $7.5 price target, implying shares will decline by 19% in the year ahead. (To watch Treiber’s track record, click here)
Amongst Treiber’s colleagues, sentiment toward this name remains downbeat too. With 2 additional Sells and 1 Hold, the stock has a Moderate Sell consensus rating. Going by the $8.95 average price target, the shares are expected to stay rangebound in the year ahead. (See BlackBerry stock forecast on TipRanks)
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.