BlackBerry Ltd: This 1 Number Could Send BlackBerry Stock Soaring

bbry stockA Game-Changer for BlackBerry Stock?

There are many things to look for in BlackBerry Ltd (NASDAQ:BBRY) stock’s earnings report. But there’s one thing that’s going to be crucial in determining where the company, along with BlackBerry’s stock price, could go next—and it’s not revenue or earnings.

Can BlackBerry Turn Itself Around?

BlackBerry is in a transition process.

It has a declining hardware business and a booming software and services business. Many have argued that it should get rid of its hardware device segment altogether and become a software-only company. On the other hand, the company did move to using “Android” and there are still die-hard BlackBerry fans who love their products.

So, there’s a debate over whether BlackBerry should exit its hardware business. As a matter of fact, the company’s management is likely to have already considered taking this route. BlackBerry’s CEO, John Chen, said last September that he needed one year to make the new smartphone profitable. Moreover, he said, “If by September, I couldn’t find a way to get there, then I need to seriously consider being a software company.” (Source: “Chen: BlackBerry could go software only by September,” CNBC, April 1, 2016.)

A more recent interview suggests that BlackBerry’s hardware business probably won’t be over that soon. In April, Chen told CNBC, “we have two new phones coming out between now and the end of the year.” (Source: “BlackBerry to launch two Android phones, admits Priv was too expensive,” CNBC, April 11, 2016.)

What BBRY stock investors really want to know—and what, hopefully, this earnings report could shed some light on—is whether the company is going to continue its hardware business. BlackBerry doesn’t always break out exact sales numbers, so we probably won’t know exactly how many units of the Priv the company has sold.

But there is a way to measure the progress in BlackBerry’s smartphone business and that’s through its hardware segment revenue. I’m sure analysts will ask questions about the segment’s profitability in the earnings conference call, so if you listen to that, you could get some idea as to how far BlackBerry has moved along regarding its plan to build a profitable device business.

Just like the past several quarters, BlackBerry’s software segment is expected to be the highlight of this earnings report. In its most recent fiscal quarter, the company’s non-GAAP software and services revenue surged 106% year-over-year to $153 million. In the entire fiscal year, which ended February 29, the segment brought in $527 million in revenue, a 113% improvement over the previous fiscal year. (Source: “BlackBerry Reports Software and Services Growth of 106 Percent for Q4 and 113 Percent for Fiscal 2016,” BlackBerry Ltd, April 1, 2016.)

BlackBerry is also expected to continue adding corporate clients to its software and services segment. Last time it reported, the company had 3,600 enterprise customer wins. Moreover, around 70% of its fourth-quarter software revenue was recurring.

The Bottom Line on BBRY Stock

Of course, as is the case with any company, top- and bottom-line numbers are also a focus in BlackBerry’s earnings report. On average, Wall Street analysts are expecting a 28.4% year-over-year decline in BlackBerry’s revenue to $470.94 million for the quarter. The company’s bottom line is expected to deteriorate as well, with the average estimate being a net loss of eight cents per share. (Source: “BBRY Analyst Estimates,” Yahoo! Finance, last accessed June 21, 2016.)

BlackBerry is scheduled to release its earnings on June 23 before market open. Whatever the results are, we are likely going to see some action in BlackBerry stock.