BlackBerry (BBRY) is trying to mount an epic comeback after BBRY stock collapsed more than 95% from its peak 2007 levels. It’s a long way back up, but BlackBerry’s quarterly results are fueling a rally in BBRY stock today.
Even though competitors Google (GOOG), Apple (AAPL) and Microsoft (MSFT) continue to eat away at BlackBerry’s 2.3% market share, the Ontario company has found a way to stay afloat. In fact, Blackberry is doing more than simply staying afloat. It’s fighting to regain some of its clout with the launch of its new Passport phone, and it plans to unveil yet another model, known as the Classic, later this year.
BBRY stock gained as much as 7% in trading today and has tacked on nearly 40% year-to-date. Let’s take a quick look at what investors are so excited about.
BlackBerry Annihilated Earnings Expectations Today
That’s one way to say it.
While BBRY did easily surpass analysts’ earnings-per-share projections in the fiscal year 2015 second quarter, BlackBerry actually posted a loss. But Wall Street was still thrilled, because the $11 million shortcoming amounted to a loss of merely 2 cents per share — far less than the 16 cents per share analysts expected BlackBerry to lose.
BlackBerry also has a whopping $3.1 billion in cash and short-term investments on its books, a remarkable feat considering BlackBerry’s been getting clobbered by the biggest and baddest in Silicon Valley for years on end. What’s really compelling about BlackBerry’s cash position is what it says about the floor for BBRY stock. If BlackBerry’s messaging business, brand and other intangibles were completely worthless, BBRY stock would still be worth $5.88 per share based on its cash value alone.
So at today’s levels, BBRY stock can “only” fall about 40% before shares start changing hands for what BlackBerry has in the bank.
Unfortunately, there’s a darker side to today’s BlackBerry results as well. A much darker side that reveals the ugly truth: BlackBerry’s business is dying.
BlackBerry’s sales continue to slump. Big time. FY2015 second-quarter sales came in at $916 million on sales of 2.4 million phones. For comparison, FY2015 second-quarter sales were $1.6 billion as BlackBerry moved 3.7 million smartphones. The 42% sales drop-off is already worrisome on the face of things, but considering BlackBerry also fell well short of the $950 million expected by analysts, BBRY really missed on revenue.
It’s great that BlackBerry was able trim its losses, and sales of the newly debuted Passbook phone obviously weren’t included in last quarter’s results, but a secular downtrend in sales and popularity is not a characteristic I like any of my investments to exhibit.
BlackBerry’s flush cash position will allow it to tread water for some time into the future, but that’s not quite enough to convince me that BBRY stock is a keeper.
As of this writing John Divine owned shares of AAPL stock, GOOG stock, and GOOGL stock.
