Can BlackBerry's New Classic Phone Restore Its Shares To Nostalgic Levels?

NEW YORK ( TheStreet) – BlackBerry (BBRY)  is expected to give investors a double-dose of insight into its operations on Friday, when it releases its third quarter results before the markets open. Its financial results will offer more fodder and context to its long-anticipated Classic smartphone, which was unveiled Wednesday.

Investors are hoping BlackBerry is on the cusp of returning to its glory days and that the smartphone maker's big bet on Classic will be a winner. Although reviews on Classic have been mixed, BlackBerry's stock is up nearly 7% in three days.

BlackBerry, which was left for dead prior to the arrival of CEO John Chen, has posted stock gains of more than 35% in 2014, compared to the Dow Jones Industrial Average (DJI) and S&P 500 (SPY) , which are up 6.5% and 10.8%, respectively.

Take a look at BlackBerry's 2014 performance in the chart below, courtesy of YCharts. 

BBRY Chart

 BBRY data by YCharts

Investors are anxious to see whether BlackBerry's Classic smartphone, which comes with its popular QWERTY keyboard, can help the Canadian company recapture market share it lost to Apple (AAPL) and Samsung (SSNLF) in the smartphone market. 

These questions -- among others -- will be posed to its CEO when BlackBerry reports its fiscal third-quarter financial results. Analysts anticipate BlackBerry's third quarter results to be inline with Wall Street's expectations. But when the company reports its fourth quarter results in March, Wall Street anticipates it will beat expectations.

In a note to its investors, Goldman Sachs said it's looking for BlackBerry to post third-quarter revenue of $938 million, a 21% year-over-year decline. This would be in line with the consensus estimates, according to Thomson Reuters.

Although the investment bank anticipates BlackBerry will post declining revenue, Goldman Sachs considers it an improvement because it will be a smaller decline than in the previous five quarters. This is because BlackBerry is approachng periods of easier year-over-year comparisons.

Likewise, Goldman expects BlackBerry to post an increase in hardware revenues, while projecting a 40% decline in legacy services revenue. This is good thing because BlackBerry is exiting out of low-margin services businesses and shifting towards enterprise tools and services like security.

From an operating perspective, BlackBerry is projected to report a loss of 4 cents per share on gross margin of 45.2%, which would be good enough for a 1 cent beat. Wall Street is projecting a loss of 5 cents.

All told, unlike prior leadership, CEO Chen has a better pulse on the company's strength and weaknesses. And he's working to restore BlackBerry back to relevance. It's not going to happen overnight and the Classic phone may not put a dent in Apple's smartphone dominance. That doesn't mean BlackBerry isn't successful or investors can't make money.

These shares still have a high analyst 12-month target of $18. From current levels of around $10, investors should expect $12 to $14 as a more realistic near-term target. And while that's not the triple-digit level BlackBerry traded for in 2008, it's enough to remind that this company can still execute. And better times are still to come.

Follow @Richard_WSPB

This article is commentary by an independent contributor. At the time of publication, the author held positions in Apple.

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