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BlackBerry (BB) Up 6.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for BlackBerry (BB - Free Report) . Shares have added about 6.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is BlackBerry due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

BlackBerry Q2 Loss Meets Estimates, Revenues Fall Y/Y

BlackBerry reported tepid second-quarter fiscal 2022 (ended Aug 31, 2021) results with year-over-year top-line contraction. However, solid demand for cybersecurity and IoT software products coupled with accretive design wins bode well for the Canada-based company.

Net Loss

On a GAAP basis, quarterly net loss was $144 million or a loss of 25 cents per share compared with a net loss of $23 million or a loss of 4 cents per share in the prior-year quarter. The year-over-year wider loss was primarily due to top-line contraction and higher operating loss.

Non-GAAP net loss was $33 million or a loss of 6 cents per share against net income of $58 million or 10 cents per share in the year-ago quarter. Adjusted loss per share matched the Zacks Consensus Estimate.

Revenues

Quarterly total revenues plunged 32.4% year over year to $175 million. While revenues from Cyber Security aggregated $120 million, the same from IoT totaled $40 million. Licensing and Other contributed $15 million.

In the IoT business unit, the company is witnessing significant progress despite headwinds related to the global chip shortage. An uptick in demand for QNX products and a robust pipeline of design wins, fueled by accretive partnerships, demonstrates BlackBerry’s industry leadership position and secular trends.

In Cyber Security, the company delivered solid sequential billings and revenue growth. It received strong third-party validation of the effectiveness of AI-driven, prevention-first suite of products, thereby reflecting innovative product launches.

Other Details

Gross profit declined to $112 million from $199 million in the year-ago quarter. Total operating expenses increased to $253 million from $221 million. This was primarily due to higher fair value adjustment on the convertible debentures. Operating loss was $141 million compared with a loss of $22 million a year ago.

Cash Flow & Liquidity

In the first six months of fiscal 2022, BlackBerry utilized $18 million of net cash in operating activities. As of Aug 31, 2021, the company had $291 million in cash and cash equivalents with $782 million of long-term debentures.

Outlook Reiterated

For fiscal 2022, BlackBerry expects the Cyber Security business’ revenues to be at the lower end of the $495 million to $515 million range. IoT revenues are estimated between $180 million and $200 million. Licensing revenues are anticipated to be about $10 million a quarter for the next two quarters.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -100% due to these changes.

VGM Scores

Currently, BlackBerry has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, BlackBerry has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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