BlackBerry Limited (NASDAQ:BBRY) is set to report earnings on April 1, but investors aren’t expecting much from the company. After all, BBRY stock is down about 85% over the past few years, so any sort of good news could send shares higher.
Analysts are expecting BlackBerry to report an earnings loss of $0.09 per share against a gain of $0.04 last year. Revenue is expected to decline 14.6% to $563.8 million over the previous year.
Let’s take a look at what might send BBRY stock higher after earnings.
Most of the focus for investors will be on the sales numbers of the “Priv,” BlackBerry’s flagship “Android” phone. The phone launched last November, so this earnings report will give investors a peak for the first time into how well the phone is selling. But when asked in January by CNET how the Priv was doing, CEO John Chen said, “so far, so good.” (Source: “BlackBerry going all-in on Android phones,” CNET, January 6, 2016.)
The Priv is selling for $699.00 and has been generally well received by BlackBerry users. Much is riding on the phone, as it has the potential to bring BlackBerry’s mobile phone division back from the dead.
The Priv ditches its own operating system in favor of Alphabet Inc’s (NASDAQ:GOOG) Android, a move that could save the company. There are significant advantages to this move, as BlackBerry’s market exposure goes from almost non-existent to having access to the largest smartphone market worldwide.
Android and Apple Inc.’s (NASDAQ:AAPL) “iOS” operating system dominate the global smartphone market, accounting for about 98% of total market share. Android alone accounts for 80.7%, while BlackBerry’s own operating system made up a meager 0.2% of global market share, so it’s obvious why BlackBerry is starting to wean off its OS. (“Global market share held by the leading smartphone operating systems in sales to end users from 1st quarter 2009 to 4th quarter 2015,” Statista, last accessed March 30, 2016.)
In the third-quarter conference call, Chen said there is a chance that depending on how well the Priv sells, the company could achieve breakeven operating profitability in the mobile device segment. If that happens, or if sales exceed expectations, look for an uptick in BBRY stock.
The software and services segment is growing rapidly and investors are hoping that this trend continues. In the third quarter, BlackBerry reported revenue in the segment of $162 million, up 183% over the previous year.
One exciting aspect of the division, and one that has the potential to drive growth in the future, is the company’s QNX operating system, which the company is using as a gateway into the driverless car market.
The software is already used in about 60 million vehicles, such as those from Ford Motor Company (NYSE:F), powering in-car navigation and entertainment systems. (Source: “BlackBerry Joins Self-Driving Car Race With Its Own Software,” Bloomberg, January 6, 2016.)
Now BlackBerry wants the software to be used as the brains behind self-driving cars. In January, BlackBerry showed off demo cars that can scan for obstacles, keep the car in its own highway lane, and communicate with nearby vehicles to avoid accidents.
According to Forbes, monetization of the QNX software has been week so far, so any good news on this front will benefit BBRY stock. (Source: “BlackBerry’s Software Business: Scenarios That Could Impact The Stock Price,” Forbes, March 30, 2016.)
BlackBerry Stock Is Cheap
The fact that BBRY stock is cheap isn’t necessarily a growth driver, but it’s a factor that should be considered, as it could send the stock up a bit. Because investors aren’t expecting a whole lot, any positive news from BlackBerry on April 1 will be a boon to BBRY stock.
BlackBerry management must also think the stock is cheap. In late January, management announced they are more than doubling the amount of shares they are buying back. They will now repurchase 27 million shares, which is about 5.8% of the stock float. This is an excellent indicator for investors, as BlackBerry’s management must believe that at today’s price, the stock is a bargain. It’s also a vote of confidence in the company’s turnaround.
Additionally, unlike most companies that have suffered the way BlackBerry has, BlackBerry’s balance sheet remains strong. So the company isn’t going anywhere anytime soon, making it a safe investment—at least in the short term. As of Thursday, the market is valuing BlackBerry at $4.21 billion, just barely above its book value.
The Bottom Line on BBRY Stock
BlackBerry might be down, but don’t count it out just yet. The company still has a few catalysts that could send BBRY stock higher.