BlackBerry Ltd. (BBRY) has quite a week ahead of it.
Today, the embattled smartphone company will launch its much-anticipated BlackBerry Classic, a device that will make or break the stock. It’s the first handset wholly designed under the leadership of BlackBerry CEO John Chen, who took the reins a little more than a year ago after his predecessor failed to keep BBRY stock from taking a beating and facing serious speculation about bankruptcy.
If that’s not enough, the event will be followed by a joint press conference with Samsung (SSNLF) to discuss a partnership between the two tech firms, focusing on security and software.
But even all that important news pales next to the importance of Friday’s Q3 BlackBerry earnings report.
Because the results we see there and the guidance provided for 2015 will say much about whether BBRY stock is back … or whether it is doomed to circle the drain.
BlackBerry Earnings Need a Punch
UBS analyst Amitabh Passi recently told Barron’s, “We expect shares to remain volatile given the upcoming newsflow, with bouts of euphoria followed by periods of disillusionment.” UBS also reiterated a “neutral” rating and a $9.50 price target on BlackBerry stock.
Translation from Wall Street speak: BBRY stock may wiggle in the next few weeks, but expect it to underperform. After all, it’s sitting right at $9.50 as of this moment — so the best-case scenario is it stays right here, according to UBS predictions.
Remember, John Chen is a turnaround CEO — meaning that his mere presence means serious problems afoot. Companies like Apple Inc. (AAPL) and Google Inc (GOOG) have long eaten BlackBerry’s lunch with their respective iPhone and Android products, and now there’s not much turf left for BBRY to defend.
That means a change is crucial for the trajectory of this company.
Consider that estimates are for a quarterly loss of 5 cents a share on revenue of about $940 million. The shortfall is smaller than in quarters past, sure, but revenue should finish down by more than 20% year-over-year — a sign that BBRY stock still is in trouble.
If BlackBerry was to somehow come in close to breakeven, and if revenue is not in as extreme a free-fall as some fear, there could be optimism for 2015. I’m not just talking about the stability of the company’s balance sheet, but also the likelihood of partnerships like the one with Samsung or the brand appeal with consumers to at least stay steady in the face of a few years of negativity.
When your key product is considered an also-ran, it’s never a good place to be and holds back adoption of even the best products and the best partnerships. So BlackBerry needs to prove it’s not going away.
But if earnings are worse than expected, that only reinforces the notion that there’s nothing BBRY can do — either with Samsung or with its new handset — that will ultimately change the fate of this company.
BBRY stock holders don’t have much margin for error, then. So pay close attention to both the new BlackBerry Classic event, and the upcoming earnings report for a sense of where this tech company is headed in 2015.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
