BBRY Stock: Q2 Earnings Preview

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BlackBerry (BBRY) has a busy week ahead of it. On Wednesday, the company will launch its new Passport device, which focuses on the enterprise customer, followed by its Q2 2015 earnings on Friday. Although a sea of red ink is expected, there’s a sense of optimism at BBRY for the first time in a long while.

Blackberry bbry stockSlowly, BBRY CEO John Chen seems to be getting the company back on its feet. The turnaround isn’t complete by any means, but delivering solid earnings on a relative basis should go a long way to persuading investors to stick with the company.

Here’s a quick look at what investors can expect from both BlackBerry earnings and its Passport device. BBRY stock depends on both.

The Key Numbers

The consensus estimate has BBRY revenues declining by 40% in the second quarter to $946 million with a loss of 16 cents per share. While the revenue number leaves a lot to be desired, the loss is considerably lower than the same quarter last year when it lost 46 cents per share.

Analysts expect full-year 2015 revenues of $3.91 billion accompanied by a loss of 61 cents per share, 55% lower year-over-year. Chen believes BBRY can reach cash flow break-even by the end of fiscal 2016. Raymond James Analyst Steven Li thinks it could reach that target by the end of November.

That would be huge news for BBRY stock.

However, there is an issue to watch out for. Service revenues have been on the decline; they’re expected to drop 16% in Q2 to $438 million. BMO Capital Markets analyst Tim Long expects average revenue per customer to come in at $2.86 — 27 cents lower than in the first quarter. Although these numbers won’t come as a surprise to most BBRY shareholders, it would be nice if Chen was able to provide some light at the end of the tunnel.

BBRY launches BES 12 in November, a cloud-based platform that will allow IT departments to manage employee smartphones, including non-BlackBerry devices such as iOS and Android. Any updates and/or financial guidance on this and other service-related initiatives during its Q2 conference call should be interpreted as a positive for BBRY stock.

BBRY and Passport

Investors shouldn’t expect a home run from its newest device, which will sell for $599 without a contract, less than either Apple’s (AAPL) iPhone 6 or Samsung’s Galaxy S5, both of which are priced at $650. The device itself is square in shape with a 4.5 inch screen and a three-row keyboard that delivers 60 characters per line of typing and a battery life of 36 hours.

Early reviews suggest that the Passport is of higher quality than previous models such as the BlackBerry 10. While the square shape could be disconcerting to some — it’s almost twice as wide as the iPhone 5S — those that do a lot of typing or read a lot of financial information will likely enjoy the change from the usual rectangular form.

The most important thing about the Passport launch is that its bread-and-butter business customer sees this as a reawakening of the brand. Enough has been done on the expense side of the ledger that simply slowing the quarterly revenue declines to a trickle should be enough to ensure BBRY has a long-term future.

BBRY Extra

In early September, BBRY announced that it acquired U.K. startup Movirtu for an undisclosed amount. Movirtu’s software allows companies the ability to provide employees with smartphones that have two different phone numbers, one each for business and personal, allowing employers to keep track of business usage while avoiding personal misuse. The software also works on iPhones and Android-powered devices, which means BBRY can generate recurring revenue even when the devices used aren’t its own.

From a personal perspective I think this makes a lot of sense. My wife has two phones, and I keep wondering why they can’t come up with something that allows two numbers on one phone. Movirtu’s technology solves this problem.

Bottom Line

RBC Dominion Securities analyst Mark Sue calls BES 12, “…One of the most important product launches in BlackBerry’s recent history.” I mention this because I think it’s important that BBRY investors temper their expectations for the Passport, remembering that John Chen wants the company to focus on services and software and leave hardware in the background.

Passport is just another step in BlackBerry’s transformation. The real test comes in November when the new software comes out. If BES 12 is a success and customers don’t continue to leave, BBRY has a fighting chance to remain relevant and even prosper financially.

But one step at a time.

As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/bbry-stock-q2-earnings-preview/.

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