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BlackBerry Stock: De-risked Enough Ahead of Earnings?

On March 31, cybersecurity company BlackBerry will report fourth-quarter earnings. Here's what to expect ahead of time.

Canadian cybersecurity company BlackBerry  (BB) - Get Free Report is getting ready to report its fourth-quarter (Q4) results. The company has suffered during recent quarters due to an unfavorable macro environment. But now BlackBerry is due to report earnings for the first time after its much-anticipated patent sale.

This time around, with softer earnings and revenue estimates for Q4 and with a leaner valuation since the beginning of last year, BlackBerry stock may positively surprise investors.

Figure 1: BlackBerry Stock: De-risked Enough Ahead of Earnings?

Figure 1: BlackBerry Stock: De-risked Enough Ahead of Earnings?

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What to Expect Ahead of Earnings

BlackBerry needs to report a loss per share lower than 3 cents and revenue above $186 million — which would imply a year-over-year drop of 11% — to beat Wall Street estimates.

For the third quarter, BlackBerry reported that it had broken even, versus loss-per-share estimates of 7 cents. But even that wasn't enough for the stock to rise. Poor Q4 guidance left investors wanting more.

BlackBerry management said that it expects revenues from its IoT (Internet of Things) business in Q4 to be between $50 million and $55 million, returning to a run-rate from pre-pandemic levels. For its Cyber business, revenues in Q4 are expected to be between $125 million and $135 million through pipeline growth and sequential billings growth.

As for licensing, thanks to the BlackBerry patent sales announced in January, revenues are expected to be close to zero. This expected drop in revenue is likely due to the suspension of BlackBerry's monetization from licensing.

Key Points to Pay Attention For

From a financial point of view, BlackBerry's two main segments are its Cyber and IoT businesses. The company's management expects the IoT business to return to pre-pandemic levels, although it's expected to see a minimal uptick from last quarter. And management predicts new government contracts will have made a difference to the Cybersecurity segment in Q4.

Investors are also waiting for progress reports on the IVY platform, which BlackBerry announced at CES 2022, as well as on the QNX platform. News here could give more clarity on long-term revenue.

Wall Street Meme's Take

BlackBerry shares have been down almost 30% in the last six months, and the loss-per-share estimates are quite modest. Thus, the stock could be de-risked enough ahead of earnings day to be a good deal.

This might be a good setup to own BlackBerry shares ahead of earnings — even more so due to Wall Street recently upgrading BB's rating based on its valuation, which is in line with the company's fundamentals. The meme frenzy around BlackBerry seen throughout 2021 seems to have cooled down.

Still, for the medium to long term, BlackBerry is well positioned in Cybersecurity, a segment that is expected to enjoy a considerable increase in demand from the public sector, especially with the tense geopolitical scenario. Also, BlackBerry's participation in the electric vehicle (EV) revolution could be a great driver for BB shares in the foreseeable future.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)