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Blackberry Stock Edges Lower Despite Earnings Beat

Tim Worstall
Tim Worstall trader
Updated 22 Dec 2021
  • Blackberry beat Street estimates for revenues and EPS – the stock is down slightly premarket
  • The cause of the weakness in Blackberry appears to be soft projections for the future
  • The average quant report on Blackberry is bearish as well

Blackberry Limited (NYSE: BB) stock is down a percentage point premarket off the back of its earnings announcement. This follows a 4.5% rise yesterday leading up to that profits call. A reasonable story to explain that is that the word was out about the earnings beat – gossip, not actual knowledge of course – and the reality turned out to be not as exciting as hoped.

Blackberry is, as we know, the holdover from the once near ubiquitous Blackberry phones that were so rudely pushed aside by the rise of the smartphone. The business now divides into two major and ongoing portions, the internet of things (IoT) and cybersecurity. It’s the IoT section which provides the excitement, such as it is. 

In the current results the revenue beat was a little above 4%, the EPS was flat as against the average of forecasts of minus $0.07. So, better than expected results. But as is known it’s not the past that decides stock price valuations but the future. There the news is less rosy for three reasons.

That IoT revenue is only expected to grow to the $50 to $55 million range, from $43 million. The cybersecurity from $125 to $135 million, from $128 million. Those just aren’t numbers to greatly excite. Especially as IoT is one of those fashionable areas where folks think there should be substantial growth in revenues. 

The third disappointment is in the third sector, the old IP from the phones business. There are ongoing attempts to offload this for a capital sum but it’s not proving to be an easy deal to finalise. The next update on how that’s going is expected in January.

The thing here is that Blackberry just isn’t a very exciting business at the moment. Sure, it was, that trailblazing with text messaging and secure comms on phones for businesses. But that business did get rather hit by the rise of the smartphone. That old IP portfolio they’re trying to sell is the last remnant of that. The cybersecurity business is a growth out of that past expertise but then there are so many cybersecurity providers around now. And the IoT business, despite all of the fashionable cries that it’s the next big thing, just doesn;t seem to be gaining traction with a speedy growth rate. 

This doesn’t mean that there’s anything wrong with Blackberry. Just that there’s nothing very exciting there. The market can’t see some breakout technology about to emerge, there’s not path or course to anything much other than organic growth at the rate of the general economy and or market. What everyone wants, of course, is outperformance and it’s just difficult to see where that might come from.

It’s likely that Blackberry shares will move largely with the market until and unless there’s some significant news about either outperformance in their current markets or their entry into some new one more exciting.

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Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.