A Closer Look at BlackBerry
The Bad Rap on BlackBerry Stock
It makes perfect sense that a switch to subscription revenue could temporarily cause year-over-year revenue growth to slow.
That’s because instead of new customers making a large, up-front payment, they will be paying a much smaller, monthly fee.
“Replacing the big upfront licence with a lower annual subscription means year one revenues fall, but subsequent years are higher. This means the (software-as-a-service) model is usually more profitable after around four years, and the lifetime value of a customer is higher.”
In other words, in the first year, the switch to subscription revenue will cause BlackBerry’s revenue to drop, but thereafter the switch will cause its revenues to rise.
Moreover, there is a very good chance that BlackBerry wanted to be cautious with its guidance so that it does not miss expectations in the future, causing the Street to mistrust it and leading to a really huge decline in the stock.
Also worth consideration is the huge number of institutional investors that have piled into BlackBerry stock in recent months. Many have sold some of their shares of BlackBerry after the surge that occurred in May and early June, and some bought short-term options on Blackberry.
But the large number of gigantic institutional investors who have meaningfully added to their holdings of Blackberry is quite impressive.
To name just a few, Royal Bank of Canada bought nearly 500,000 shares, Vanguard bought around 550,000 more shares, Citadel Advisors bought over 180,000 more shares, and Sumitomo Mitsui disclosed bought more than 600,000 more shares.
If BlackBerry did not have a tremendously positive long-term outlook, these huge institutional investors would not be buying so many more shares. They are ignoring the unfounded worries about BlackBerry’s short-term numbers, and so should you.
As of this writing, Larry Ramer owned shares of BlackBerry stock.