BlackBerry (BBRY) Shares Recover on New Bidder Interest

NEW YORK (TheStreet) -- BlackBerry (BBRY) recouped earlier losses to close 0.51% higher at $7.96. The recovery was due to potential new bidder interest from private equity group Cerebus Capital Management.

The Wall Street Journal reports Cerebus is seeking a confidentiality agreement to allow access to all BlackBerry's financial information. After it has reviewed the material, it will evaluate whether to proceed with a bid.

Earlier in the day, the struggling smartphone maker dipped to $7.51, 5 cents above its 52-week low. After market close on Tuesday, BlackBerry submitted a regulatory filing detailing job-cutting expenses of $400 million, significantly higher than an initially estimated $100 million. BlackBerry plans to cut 40% of its workforce in an effort to manage debt.

TheStreet Ratings team rates BlackBerry as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate BlackBerry (BBRY) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Communications Equipment industry and the overall market, BlackBerry's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $630.00 million or 11.39% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • BlackBerry reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, BlackBerry swung to a loss, reporting -$1.20 vs. $2.24 in the prior year.
  • 41.06% is the gross profit margin for BlackBerry which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -2.73% is in-line with the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

Written by Keris Alison Lahiff.