Headquartered in Ontario, Canada, BlackBerry Limited (BB - Get Rating) is a leading intelligent security software and services company. Its clientele includes enterprises and governments across the world. As of Feb. 28, 2021, BB owned more than 38,000 worldwide patents and applications. However, the company has an ISS Governance QualityScore of 8, indicating high governance risk.

BB gained momentum early last year as it became a popular meme stock frequently discussed on the Reddit forum r/wallstreetbets. The stock hit its 52-week high of $20.17 on June 3 last year. 

However, due to the fading interest of meme investors and bleak fundamentals, BB has declined 17.9% in price over the past year. Furthermore, the stock has plunged 24.5% year-to-date.

Click here to check out our Software Industry Report for 2022

Here is what could shape BB’s performance in the near term:

Expanding Market Reach

BB has partnered with several companies and governments worldwide over the past few months. On March 24, 13 municipalities in the Niagara Region and the Niagara Regional Police Service chose BlackBerry AtHoc as their critical management platform. The deployment of the most secure critical event management solution is expected to boost regional safety in Canada while boosting BB’s revenues.

Also last month, BB collaborated with leading Chinese Tier 1 automotive supplier Marelli. Under this partnership, Marelli will leverage several BB solutions to power its critical in-vehicle system, the cockpit domain controller. Regarding this, BB Technology Solutions SVP and Co-Head John Wall said, “We are pleased to expand our long-term collaboration with Marelli to further empower the automotive industry and our customers across the world…Together, we will continue to deliver innovative, integrated and intelligent next generation cockpit technology to the market underpinned by BlackBerry’s safety-certified, secure and reliable solutions.”

Poor Short-term Growth Prospects

Analysts expect BB’s revenues to come in at $160.67 million in its fiscal 2023 first quarter (ending May 31, 2022), indicating a 7.7% decline year-over-year. The company’s EPS is expected to decline 20% year-over-year in the current quarter. Furthermore, the Street expects BB’s revenues to decline 2% from the same period last year to $171.50 million in the next quarter and 4% year-over-year to $689.67 million in the current fiscal.

The consensus EPS estimate for fiscal 2023 (ending February 2023) indicates a 54.3% decline from the same period last year. Analysts expect the company’s EPS to remain negative until at least fiscal 2024.

Consensus Rating and Price Target Indicate Downside

Among the five Wall Street analysts that rated BB, three rated it Hold, while two rated it Sell. The $6.50 12-month median price target indicates an 8.6% potential downside from yesterday’s closing price of $7.11. The price targets range from a low of $5.60 to a high of $7.00.

POWR Ratings Reflect Uncertainty                                                                      

BB has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

BB has a C grade for Momentum, Value, and Quality. The stock is currently trading above its 50-day moving average of $7.08, but below its 200-day moving average of $9.44, in sync with the Momentum grade. In addition, BB is currently trading 5.89 times its forward sales, which is 76.1% higher than the 3.34 industry average. However, the stock’s trailing-12-month Price/Book multiple of 2.61 is 30.9% lower than the industry average of 3.77, justifying the Value grade. Also, BB’s 65.04% trailing-12-month gross profit margin is 30.3% higher than the 49.91% industry average. However, the company’s trailing-12-month levered free cash flow margin is negative, in sync with the Quality grade.

Among the 54 stocks in the C-rated Technology – Communication/Networking industry, BB is ranked #39.

Beyond what I have stated above, view BB ratings for Stability, Growth, and Sentiment here.

Bottom Line

With increasing cybercrime worldwide, the demand for secure software intelligence platforms is at its peak. As a leading player in this space, the company stands to benefit from the industry tailwinds over the long term. However, its bleak short-term growth prospects and negative profit margins are a cause for concern. Thus, we think investors should wait until the BB’s financials and profit margins improve before investing in the stock.

How Does BlackBerry (BB) Stack Up Against its Peers?

While BB has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Extreme Networks, Inc. (EXTR - Get Rating), Viavi Solutions Inc. (VIAV - Get Rating), and AudioCodes Ltd. (AUDC - Get Rating), which have an A (Strong Buy) rating.

BB shares were trading at $6.91 per share on Wednesday morning, down $0.20 (-2.81%). Year-to-date, BB has declined -26.10%, versus a -5.97% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

More Resources for the Stocks in this Article