Investors seem less than convinced the company is on track for a rebound, even as it reported a small profit and sooner-than-expected return to positive cash flow. Shares are up over 27% for the year to date.
"Revenue missed consensus by a sizable amount, which is especially troubling because it included one month of new BlackBerry Passport sales," Brian Colello, analyst at research firm Morningstar, said, referring to BlackBerry's new smartphone that sports a larger touchscreen and keyboard.
While speaking to analysts Friday during its quarterly conference call, John Chen, BlackBerry's CEO, cited weaker-than-expected hardware sales during the quarter. He said because of limited production, all device orders could only be fulfilled in the fourth quarter.
At a November analyst conference in San Francisco, Chen warned BlackBerry could disappoint as the company's revenue profile changes. It guided for a 50% decline in services revenue for fiscal year 2016 (ending February 2016), down from an expected fiscal-year 2015 level of $1.6 billion.
Chen reminded analysts today that BlackBerry is committed to better execution, saying, "Our focus now turns to expanding our distribution and driving revenue growth." He said the company "achieved a key milestone in our eight-quarter plan with positive cash flow." He expects breakeven or better cash flow from operations in future.
The company is exiting a once-lucrative services business where it made money charging system access fees. BlackBerry is hoping its new Passport and Classic phones can put a dent in the hardware market at some point next year.
For the September-to-November period, the Canadian company reported adjusted earnings of $6 million, or 1 cent per share, beating Wall Street estimates of a 5-cent loss, according to Thomson Reuters. Revenue totaled $793, falling well below Wall Street estimates of $1 billion.
On Wednesday, the company unveiled its long-anticipated Classic phone to mixed reviews. Investors were hoping BlackBerry was on the verge of returning to its glory days, pushing shares up 6.68% before Friday's drop.
However, Colin Gillis, tech analyst at BGC Partners in New York, said BlackBerry did achieve $43 million in positive cash flow, and "Chen did a good job controlling expenses."
He added, "The fact that he [Chen] overachieved by turning cash flow positive this quarter -- that's a great milestone. It gets easier from here."
Investors can only hope that's the case.
"We rate BLACKBERRY LTD (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. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity."
You can view the full analysis from the report here: BBRY Ratings Report