BlackBerry (BBRY) Stock: Will Earnings-Fueled Gains Last?

BlackBerry Ltd (NASDAQ: BBRY)

BlackBerry hasn’t had the strongest time in the market as of late. However, that may be changing. Early this morning, the company released its earnings report with results that were better than expected. Today, we’ll talk about what we saw from earnings, how the market reacted to the news, and what we can expect to see from BBRY moving forward.

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BBRY Releases Strong Earnings

As mentioned above, early this morning, BlackBerry released its earnings for the second quarter. While revenue came in a bit low, earnings blew away expectations. On top of that, guidance was overwhelmingly positive as well. Here’s what we saw from the report:

  • Revenue – Starting with the bad and moving to the good, BBRY didn’t do too well when it came to revenue. During the second quarter, analysts expected that the company would generate $393.75 million in total revenue. However, the company actually reported that revenue for the quarter came in at $352 million.
  • Earnings – While revenue was a bit lower than expected, BBRY did incredibly well with regard to earnings per share. During the second quarter, analysts expected that the company would generate a loss of $0.05 per share. However, the company actually reported flat earnings at $0.00 per share, $0.05 ahead of analyst expectations.
  • Guidance – If strong earnings didn’t excite investors, guidance definitely did. During the full 2017 year, analysts are expecting that BlackBerry will generate a loss of $0.15 per share. However, according to guidance released with earnings this morning, the company is expecting to produce earnings in the amount of -$0.05 to $0.00. If this figure is hit, the company will beat expectations in a big way.

In a statement, John Chen, Executive Chairman and CEO at BBRY, had the following to offer:

We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold…. In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history. We also completed initial shipments of BlackBerry Radar, an end-to-end asset tracking system, and signed a strategic license agreement to drive global growth in our BBM consumer business.

Our new mobility solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia. Under this strategy, we are focusing on software development, including security and applications. The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital.

We remain on track to deliver 30 percent revenue growth in software and services for the full fiscal year. We are revising upward our non-GAAP EPS outlook to a range of breakeven to a five cent loss, compared to the current consensus of a 15 cent loss. This reflects increased confidence based on improving margins and reduced interest expense from the recent refinancing of our debt, as well as planned investments in growth areas.”

How The Stock Reacted To The News

As investors, one of the first things that we learn is that the news moves the market. In this particular case, the news that was released was overwhelmingly positive. As a result, we’re seeing strong gains in the value of the stock today. Currently (11:11), BBRY is trading at $8.18 per share after a gain of $0.31 per share (3.87%) thus far today.

What We Can Expect To See Moving Forward

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Moving forward, I maintain my bullish opinion with regard to BlackBerry. While the company has dealt with massive issues in the past, it seems like they are finally back on a path toward solid growth. The outsourcing of smartphone production ultimately reduces the costs and risks associated with a potential smartphone failure. In the meantime, BBRY now has added time to focus on its high-growth sector – software. As a result, the company is expecting to break even in the fiscal 2017 year. For this to happen, we’ll need to see quarterly profits at some point. All in all, I’m incredibly impressed with what we’ve seen from BBRY lately, and I’m expecting to see gains ahead.

[Image Courtesy of Wikimedia]

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