The BlackBerry Ltd (BBRY) Priv has, by all accounts, been a success for the company, and was a catalyst for BlackBerry stock to end 2015. However, investors have somewhat overlooked Priv in recent months due to its limited availability on a short release.
But looking ahead, all that will change, and BBRY investors will realize just how important Priv is to BlackBerry stock.
BBRY Succeeds With Priv
The Priv launched late last year, and is BlackBerry’s first Android-powered smartphone. Of course, it still has many of the hardware and software features that make it a BlackBerry, but the difference is that users have a larger selection of apps — and apps that are up-to-date.
While BBRY does not release specific hardware sales figures to the public, there were several hints in the company’s last quarter to suggest that the Priv is performing quite well.
For one, BBRY recognized revenue on a total of 700,000 units, about 100,000 fewer than the quarter before. However, the average selling price of smartphones during that quarter rose from $240 to $315, a 31% increase.
Keep in mind that BBRY’s ASP on smartphones has consistently fallen in recent years as the company prices its hardware to be more competitive. Yet, the Priv is a premium product that’s priced at $700. Therefore, if the Priv sold well during BlackBerry’s last quarter, then it makes sense that its overall ASP would rise.
What makes this even more impressive as it relates to the Priv is that the device was only available for about one month of BlackBerry’s last quarter, and was only sold at one carrier, AT&T Inc. (T). Yet, BBRY sold enough devices to produce a significant jump in its overall ASP.
BBRY Doubles Its Chance for Success
With that said, the Priv is clearly performing well, and not only has the potential to drive overall revenue higher for the company, but also margins. Furthermore, this upcoming quarter will be the very first where BBRY reports a full three months of Priv sales.
The only issue is that consumers are limited on where they can purchase the Priv. Up until January, AT&T was the only carrier that sold Priv, and then T-Mobile US Inc (TMUS) became the second.
Just recently, in March, Verizon Communications Inc. (VZ) became the third. VZ is the country’s largest carrier with 106.5 million retail postpaid connections. When you add T-Mobile to the mix, BBRY more than doubled its chances for Priv success with the addition of these two nationwide carriers.
All things considered, BlackBerry stock is about 30% above the lows it made late last year, with much of its gains coming after the Priv launch. That’s because of the implications of Priv on BlackBerry stock and its business as a whole.
No, the Priv is not going to be the next iPhone, but what investors must realize is that it does not need to be. Even if BBRY ships two million Privs in 2016 at a $700 selling price, it creates $1.4 billion in revenue. While a big chunk of the $2.1 billion in revenue expected from BBRY over the next year is tied to hardware, I doubt any analyst expects $1.4 billion in revenue from the Priv or Android phones.
Not to mention, margins on high-end hardware are far better than with low-end products. In retrospect, it is possible that BBRY creates $300 million in profits if it can ship a couple million high-end Android smartphones. That would do wonders for BlackBerry stock, which is valued at $4 billion.
Lastly, success in hardware equals success in software and services. For software and services to perform well, BBRY needs to have consumers using its products.
When BBRY was trying to succeed with BB10, it was trying desperately to maintain its smartphone market share of less than 1%, and prevent Android and iOS from stealing it. Nowadays, BBRY is targeting the near-85% of smartphone users on Android, and just recently more than doubled its chances of success by making the Priv available at Verizon and T-Mobile.
With BBRY having $2 billion in cash and short-term investments, a patent portfolio worth billions and a legitimate shot for revenue and margin growth with Priv and Android, it’s safe to conclude that BlackBerry stock is presenting a good investment opportunity.
As of this writing, Brian Nichols owned BBRY stock.
