Few leading companies know the phrase here today, gone tomorrow quite like BlackBerry Ltd (BBRY).
The technology firm formerly known as Research in Motion was a pop-culture phenomenon in the mid-to-late 2000s. BlackBerry phones introduced an innovative keyboard design that dramatically increased texting speed — so much so that the ensuing craze was dubbed “CrackBerry.”
The dominance of BBRY in both the financial markets and the retail sector was unquestioned until a new tech pimp rolled into town. Apple Inc. (AAPL) introduced the iPhone, and that was all she wrote for BlackBerry stock.
The Demise of BBRY Stock?
It’s hard to overstate just how dramatic of a fall it was. At its peak, BlackBerry stock neared $150 a pop. Unfortunately, this zenith coincided with the months leading up to the 2008 global financial crisis.
Still, even throughout 2010, BlackBerry stock was averaging around $60 in the markets. But the troubles plaguing BBRY — primarily, the clunky interface and the annoying lag of their touch-screen products — choked the window of opportunity in combating AAPL. Today, BBRY shares are trading at mere fractions of what they used to be worth.
Could that change with their upcoming fourth quarter of fiscal year 2016 earnings report, scheduled for a Friday morning release?
April Fools’ Day may not be the most ideal time for BlackBerry to disclose their Q4 results. Indeed, Wall Street is expecting a joke of a performance. Consensus estimate for earnings per share pegs BlackBerry stock at nine cents in the red, a bearish figure that has not changed over the past three months.
More ominously, analysts expect a close to 15% drop in year-over-year revenue in Q4.
Should top-line sales meet the consensus, that would drop annual revenue for BBRY under $2.3 billion. That would result in five consecutive years of declining sales, with an average loss of 34%. The decision by Facebook, Inc. (FB) to drop support for BlackBerry devices doesn’t help matters, but this is merely a symptom of the revenue malaise.
I could counter with the fact that BBRY products show signs of life in India, but the reality is that BlackBerry only has 0.2% of the global smartphone market share. Although it’s bad news, it’s news that is entirely expected and priced in.
The question is whether BBRY can stop the hemorrhaging in the bottom line, or at least pare some of the forecasted losses. This is where things get intriguing technically for BlackBerry stock.
Since Q1 FY2013, BBRY has beat earnings consensus 10 times. Of those beats, shares have moved up over the following month 80% of the time, for an average gain of 9%.
On the flipside, there have been five negative earnings surprises, with three of them leading to losses in the markets averaging 17%. So the statistical data for BlackBerry earnings is like World Cup qualifiers — win and you’re in.
Who Will the Joke Be On in Blackberry Earnings?
Given the historical trend that BBRY is more winner than loser — at least from Wall Street’s perspective — I’d say there’s a healthy chance that BlackBerry stock pulls off its own April Fools’ joke on the markets. On the fundamental side, it’s quite obvious that the company has been dumping a lot of unnecessary costs. Their overhead expenditures, ranging from cost of production down to the backroom printer, are significantly off prior highs.
In addition, BBRY is more than willing to cut where it hurts the most — employee headcount.
Moving forward, there are developments affecting BlackBerry stock that are far more exciting than the granularities of corporate accounting. Primarily, the company wants to shift from a commoditized business to one that is service oriented.
The prime target here is cyber-security. With the acquisition of Encription — a U.K.-based consulting agency specializing in online security mechanisms — BlackBerry stock potentially opens itself up to a $77 billion industry.
Best of all, it’s one that is expected to have a high growth curve, and is arguably less saturated than the over-the-top smartphone industry.
This doesn’t mean that BlackBerry should give up on the product that helped spark the smartphone revolution. The company’s Android-based Priv phone — released in late 2015 — has shown a significant sales boost despite the fact that it initially launched through one carrier, AT&T, Inc. (T). Now, T-Mobile US Inc. (PCS) and Verizon Communications Inc. (VZ) want in on the action.
Although the Priv will not likely beat AAPL’s iPhone on volume, it can do well on margin based on its premium sales tag of $700. That’s smart thinking as BBRY undergoes another shift from industry behemoth to agile street fighter.
Bottom Line for BBRY Stock
For the most part, no one is taking BlackBerry stock seriously. Its position in the markets was upended by AAPL, and BlackBerry has spent years floundering in obscurity.
But with the storm fading in intensity, BBRY has a shot at redemption. Technical factors are supportive of a move up should BlackBerry stock surprise against its earnings expectations. Furthermore, a change in the way things are run are all positives that BBRY can bank on.
It’s admittedly speculative, but there’s real bite to this bark.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
