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Nicholas Kitonyi
Nicholas Kitonyi
Articles (322)  | Author's Website |

BlackBerry Has Yet to Turn a Corner Despite Earnings Beat

The stock is down more than 19%

Shares of BlackBerry Ltd. (NYSE:BB) fell more than 19% following its quarterly earnings report on Tuesday evening. The Canadian company reported results for its fourth quarter and full fiscal 2020, which ended Feb. 29.

The companys earnings beat expectations, prompting an after-hours surge of about 5%. However, that gain was quickly wiped out on Wednesday and Thursday as the shares plunged further to trade at $3.31, down from Tuesdays close of $4.12. This came after analysts revised their revenue outlook down to $990 million compared to an earlier estimate of $1.2 billion. BlackBerry is now down more than 76% since the start of 2018.

BlackBerry's management did not provide a financial outlook for 2021 as a result of the coronavirus pandemic.

The company is arguably famous for what did not work out after its BlackBerry phones and tablets failed to match competition. This resulted in a complete change in the industry of operation. BlackBerry now focuses on enterprise software and the internet of things (IoT).

The companys competition has since switched from the likes of Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Ltd (XKRX:005930) to enterprise software companies that include Salesforce.com Inc. (NYSE:CRM), SAP SA (NYSE:SAP) and Microsoft Corp. (MSFT), among others. Nonetheless, the grass has not proven to be any greener yet, with Blackberry still struggling to establish stable top-line growth.

Earnings highlights

In fiscal 2020, BlackBerry posted non-GAAP revenue of $1.1 billion, which reflected about 20% growth from 2019. GAAP revenue also increased by 15% to $1.04 billion.

On the other hand, non-GAAP earnings of 13 cents per share beat the management's guidance of 8 cents per share. The company reported $26 million in cash from operations. Capital expenditure of $12 million resulted in free cash flow of $14 million.

In the most recent quarter, non-GAAP revenue grew 13% to $290 million, slightly higher than the GAAP revenue of $282 million, which gained 11% from the prior-year quarter.

The companys quarterly GAAP net loss of $152 million was a huge slide from a net profit of $93 million posted a year ago. The company spent $35 million for the acquisition of intangibles amortization expense, $27 million in goodwill and long-term asset impairment charges and $17 million in stock compensation expense. There was also a charge of $5 million related to the fair value adjustment on the debentures. All these contributed to the massive difference between the non-GAAP earnings of 9 cents and GAAP net loss of 7 cents per share.

Looking forward

BlackBerry is still in a transition phase. The company is developing products that will play a key role in its long-term future. Following the release of the fiscal 2020 earnings results, Executive Chairman and CEO John Chen said that during the year, the company released over 30 new products and made strong progress on developing BlackBerry's zero-trust architecture as part of the Spark platform.

The Spark platform is a data processing framework designed to process tasks quickly on large data sets. It also distributes data sets on multiple computing platforms on its own or together with other computing tools. BlackBerry is targeting the rapidly growing IoT market, which gels well with its enterprise software services business.

The companys stock currently has a forward 12-month price-earnings ratio of about 33.22 and a trailing 12-month price-sales ratio of 2.56. This appears significantly expensive compared to the likes of SAP's ratios of 18.02 and 1.54 and IBM (NYSE:IBM), which trades at a forward price-earnings ratio of 8.28 and a price-sales ratio of 1.28.

Disclosure: No positions.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

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