BlackBerry Limited (BB) is a Waterloo, Canada-based intelligence security software and services provider. Its clientele includes enterprises and governments worldwide. However, BB has an ISS Governance QualityScore of 8, indicating relatively high governance risk.

BB’s revenues slumped 15.6% year-over-year to $184 million in its fiscal 2022 third quarter, ended November 30, 2021. Its gross margin declined by 470 basis points from its year-ago value to 63.6%. However, the company’s operating income came in at $51 million due to a $110 million gain from a fair value adjustment of its debentures. Consequently, its net income was $74 million, which was substantially higher than its negative year-ago value. However, its loss per share amounted to $0.05. And its adjusted EBITDA loss was $8 million, which was significantly lower than its positive year-ago value.

However, the company beat the FactSet consensus revenue and loss per share estimates of $173.60 million and $0.07, respectively. Consequently, shares of BB have popped 7.4% in price since the third-quarter earnings release on December 21, to close yesterday’s trading session at $9.40.

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

Meme Stock

BB has been popular among meme investors over the past year and has frequently been mentioned in the popular Reddit forum r/wallstreetbets. Approximately 45 posts mentioning BB have been made on the Reddit forum over the past seven days. However, 54% of the comments were negative.

Approximately 36.23 million shares of BB are sold short (as of November 29, 2021), amounting to 7.25% of the float. It has a 4.61 short ratio.

Bleak Growth Prospects

Analysts expect BB’s revenues to decline 11.9% in its fiscal fourth quarter (ending February 2022) and 19.6% in the current year. Furthermore, the Street expects the company’s EPS to remain negative until at least 2023. In addition, BB’s EPS is expected to decline at a 21.9% rate per annum over the next five years, while its EBITDA is expected to decline 63.5%.

Consensus Rating and Price Target Indicate Potential Downside

Of the four Wall Street analysts that rated BB, three rated it Sell while one rated it Hold. The $7.73 12-month median price target indicates a 17.8% potential downside from yesterday’s closing price of $9.40. The price targets range from a low of $7.41 to a high of $8.50.

Unfavorable POWR Ratings

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

The stock has a D grade for Quality, Sentiment, and Stability. BB’s negative net income margin and ROE justify the Quality grade. Furthermore, analysts expect the company’s revenues and EPS to decline in the near term, in sync with the Sentiment grade. In addition, the stock’s relatively high 1.07 beta accounts for the Sentiment grade.

Of  55 stocks in the Technology – Communication/Networking industry, BB is ranked #49.

In total, we rate BB on eight distinct levels. Beyond what we have stated above, we have rated BB for Growth, Momentum, and Value. Get all BB ratings here.

Bottom Line

BB’s market share has been contracting over the past decade because the company failed to capitalize on the latest smartphone trends. During its peak in 2011, the company controlled 50% of the smartphone market in the U.S. and 20% globally. However, BB lost considerable market share with the rapid growth of android and touch screen phones. The company’s revenues have fallen  at a rate of 28% over the past 10 years. With bleak growth projections and negative ROE, we think BB is best avoided now.

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

While KMX has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Photronics, Inc. (PLAB), Extreme Networks, Inc. (EXTR), and Viavi Solutions Inc. (VIAV), which have an A (Strong Buy) rating.

Click here to checkout our Cybersecurity Industry Report

BB shares were trading at $9.45 per share on Tuesday afternoon, up $0.05 (+0.53%). Year-to-date, BB has gained 42.53%, versus a 29.23% 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...

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