Investors who’ve been holding onto BlackBerry (NYSE:BB) stock hoping for another meme stock rally may want to throw in the towel.
With BB stock now just over $10 per share and about 60% below its peak of $28.77 earlier this year when it was targeted by investors who frequent the WallStreetBets Reddit site, BlackBerry looks unlikely to recover. With the meme stock crowd having moved on to other targets, so too should BlackBerry’s current shareholders.
BlackBerry’s Latest Earnings
Today BlackBerry has morphed from a smartphone manufacturer to a company that is primarily focused on software that powers motor vehicles, notably including self-driving cars, and enterprise-level cybersecurity solutions. While the company has achieved some wins with its renewed strategy, such as partnering with Amazon (NASDAQ:AMZN) and the Ford Motor Co. (NYSE:F) on motor vehicles, and joining forces with Microsoft (NASDAQ:MSFT) on cybersecurity solutions, these victories have yet to give a meaningful boost to the company’s finances.
For its fiscal second quarter, BlackBerry reported revenue of $175 million, which was ahead of the $163.5 million average estimate of Wall Street analysts.
The company reported a per-share loss of 6 cents, which was also better than the loss of 7 cents per share that analysts, on average, had forecast. In reporting the better-than-expected earnings, BlackBerry touted growth in its key cybersecurity and Internet of Things (IoT) segments. BlackBerry also reported that it had cash on hand of $772 million at the end of Q2.
While the latest earnings are a step in the right direction, BlackBerry has a lot of ground to make up. In its previous earnings report in June, Blackberry reported that it lost $62 million, or 11 cents per share, in Q1.
During the same period a year earlier, the company lost even more money, $636 million, or $1.14 per share. Its Q1 revenue also fell, dropping $174 million year-over-year. That was worse than analysts’ mean outlook.
Struggling in Cybersecurity
While some analysts have been talking up the opportunity BlackBerry potentially has in cybersecurity with the Biden administration focused on the issue and key partners such as Microsoft helping to lead the response to counter cyber and ransomware attacks, the reality is that BlackBerry has struggled to sell its cybersecurity offerings. The firm’s Q2 cybersecurity revenue came in at $120 million, up from $107 million in the previous quarter and on par with the same period of last year. While it’s pushing into the space, BlackBerry remains a small player in cybersecurity.
Other possible growth engines for the company, including various partnerships with government agencies around the world, including the U.S. Department of Commerce and the U.S. Department of Energy, need to accelerate significantly to have a strong impact on the Canadian company’s earnings.
Growing new business opportunities to the point where they contribute to the bottom line has been a key challenge for BlackBerry since it exited the smartphone market.
Keep BB Stock Where it Belongs – on Your Watchlist
BlackBerry has shown glimmers of hope, but the company is not yet on firm footing. BlackBerry continues to struggle in most areas of its business, and that is reflected in its depreciating share price. The only real rally undergone by the shares came when they were targeted by retail investors who treated BlackBerry as a meme stock and thought it would be amusing to send a widely shorted security higher than its fundamentals justify.
Given its still-improving financials and its ongoing struggles to grow into a competitive firm, it is doubtful whether BlB stock can again run to the levels seen earlier this year.
BlackBerry remains a work in progress. As a result, investors should keep the company on their watchlist for the time being. Right now, BB stock is not a buy.
Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
