BlackBerry Ltd (NASDAQ:BBRY) reports its fiscal fourth-quarter results Friday before the bell. It’s a potential inflection point for the BBRY stock price, which is down 13% already in 2015.
The BBRY stock price isn’t just struggling this calendar year; it’s plunged 86% over the last five years as Apple Inc. (NASDAQ:AAPL) and the Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) wonder-acquisition Android gobbled up BlackBerry’s share of the smartphone market.
Despite the insistence that BlackBerry should now be viewed as a software company at heart, the painful truth is that BBRY still relies heavily on hardware to drive revenue … and its hardware is a tougher and tougher sell with consumers each year.
BBRY Revenue Will Fall and Losses Will Continue
Sales will almost certainly fall in the quarter ended Feb. 28, with revenue expected to come in around $801 million, a decline of about 18% from the same quarter a year ago. Wall Street analysts also expect another negative EPS figure, with BBRY stock losing 4 cents a share.
RBC Capital Markets analyst Mark Sue has particularly bearish expectations for BlackBerry this quarter. He expects smartphone sales of just 1.3 million units to contribute to both revenue and EPS misses: Sue sees quarterly revenue of $661 million and an EPS loss of 7 cents, both markedly before consensus estimates.
While he notes that the company’s newest major handset release, the BlackBerry Classic, is off to a “decent start,” it won’t be enough to fuel a blowout quarter. That’s not exactly BBRY’s fault — the Classic launched about halfway through the quarter, so its impact on results will necessarily be limited.
That said, Sue doesn’t see BBRY smartphone sales returning the company to profitability next year, either:
“8M-10M units are needed to have scale for profitability. We’re expecting 7.6M BB10 units in FY16.”
Point being, when you zoom out and look at the longer-term picture for BBRY stock, BlackBerry will need to look to software, security, and services for growth. Its hardware isn’t cutting it, and despite its best intentions, I don’t see a recent partnership with Samsung Electronics (OTCMKTS:SSNLF) and International Business Machines Corp. (NYSE:IBM) on a “secure tablet” — under the wildly creative moniker BlackBerry SecuTablet — driving oodles of growth.
BlackBerry has previously targeted software revenues of $500 million for fiscal year 2016, so pay attention to whether BBRY stands firm on that figure, which incidentally RBC sees as one of the more important indicators for future organic growth.
On the plus side, BBRY stock has surpassed earnings expectations in four consecutive quarters now, and another beat could mean serious short-term upside for shares, which are uniquely poised to rally on a short squeeze. With a massive 18% of the float sold short, bearish investors may be forced to pile into BlackBerry stock to cover their positions Friday if the market likes the company’s numbers.
Unfortunately, there’s no real reason to believe BlackBerry will impress anyone on Friday.
As of this writing, John Divine owned shares of GOOG stock, GOOGL stock and AAPL stock. You can follow him on Twitter at @divinebizkid or email him at email@example.com.