Blackberry Swings to Profit in 2Q18

Blackberry Swings to Profit in 2Q18

 
On Thursday last week, the once iconic smartphone manufacturer BlackBerry Limited (NASDAQ: BBRY), which licensed its hardware technology last year and started focusing on software, reported better than anticipated fiscal 2018 second-quarter results that beat analysts’ estimates. The company issued a strong fiscal 2018 revenue guidance. Additionally, BlackBerry also stated that it anticipates positive earnings and cash flow in the current fiscal year. We expect the stock, which closed at $11.34 on Monday, to rally further in the days to come.

The Waterloo, Ontario-based company recorded fiscal 2018 second-quarter revenues of $249 million, down from $352 million last year. Blackberry reported a swing to a 2Q18 GAAP net profit of $19 million, or $0.04 per share, from a GAAP net loss of $372 million, or $0.71 per share in 2Q17.

Excluding charges related to debentures fair value adjustment, impairment, deferred revenue, and amortization, among others, the 2Q18 non-GAAP net income was $26 million, or $0.05 per share. Analysts had expected Blackberry to break even on revenues of $220 million.

Software and services revenue reached a record $195 million in the quarter ended August 2017. The reported figures surpassed RBC analyst Paul Trieber’s estimates of $174 million and $176.2 million from Gus Papageorgiou of Macquarie.

The company’s CEO John Chen had spent the past few years in winding down the mobile phone business and create a profitable software company. During the recent quarter, Blackberry successfully enrolled UBS Group AG as its customer for enterprise software solutions. Licensing business also generated about $56 million, up 250% from the same period last year. Chen is confident that the licensing business is now generating about the same revenue as the Enterprise Software business. Blackberry also signed an agreement with Delphi Automotive Plc., an auto-parts supplier, to provide the operating system for the latter’s self-driving technology.

For fiscal 2018, the company expects non-GAAP revenues of between $920 million and $950 million. Blackberry also expects a 10% to 15% growth in the non-GAAP software and services revenue. Furthermore, the company expects to report positive, non-GAAP EPS and free cash flow for full year 2018. Analysts are forecasting revenues of $924.40 million in 2018.

The stock has climbed above the 50-day exponential moving average. The bullishness is also indicated by the supertrend indicator. Additionally, the Chaikin money flow indicator is above the reading of zero. Thus, we forecast a continuation of the current uptrend.

Blackberry - Technical Analysis - 3rd October 2017

To benefit from the appreciation in the stock’s price, we are looking at the possibility of buying a call option offered by one of our reliable binary brokers. The option should be active until October 11th. Additionally, a strike price of about $11 would increase the chances of success in the deal.


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