BlackBerry may have been a stock market winner over the past year, but the company’s financials still don’t merit your investment dollars, says Brian Acker, CEO and chief investment strategist at Acker Finley.
In the midst of a reinvention as a secure software company, Canada’s BlackBerry has seen its share price take off over the past 12 months, going from the $9.00 range at the start of 2017 to almost double that at its January peak of $17.94.
CEO John Chen has been at the helm since 2013 when the remake was just beginning. Now it’s four years later and Chen is pleased with the results.
“Our strategy is working and our execution is yielding results,” said John Chen to the Financial Post in December on the release of BB’s fiscal third quarter 2017 results. “We are a market leader in secure endpoint management and embedded software. The validation we have received, from partners, customers and industry experts around the world, speaks for itself.”
That Q3 of fiscal 2017 saw software and services revenue for BlackBerry of $190 million, with a gross margin of 74 per cent, breaking the previous quarter’s record, along with an overall revenue of $226 million.
Still, those numbers are small compared to its mobile device heyday and not enough to merit the kind of investor attention BB has been getting, says Finley, who recently spoke to BNN.
“[BlackBerry] doesn’t rank in my model price because they don’t have any earnings yet, three to four years on,” says Finley. “When you look at the press clippings, they’re very positive, but when you look at the fundamentals of the company, there’s no earnings.”
“They talk a lot about cash flow, etc., and you know the market does jump on a favourable story about self-driving cars and whatnot, but none of that is being translated in terms of the financials of the company,” he says. “So I don’t have a position. I think the stock price is anticipating a lot in terms of earnings but certainly there’s no sign of those earnings.”
BlackBerry quit making its own phones in 2016, while the company’s current transition is being aided by their attempt to cash in on the wealth of technology and patents BlackBerry has acquired over its years in the mobile phone business. Last fall, the company took a first step in that direction with the licensing of its specialized version of Google’s Android software to Chinese device manufacturer NTD.
In December, BlackBerry QNX, a wholly owned subsidiary of BlackBerry, announced the opening of a new autonomous driving vehicle research facility in Kanata, Ontario. Chen said that the facility will add 650 new employees to its Ottawa-area operations.
In recent months, the company has signed a new deal with Ford Motor Co. to create QNX software for autonomous driving vehicles. “Our innovation track record in mobile security and our demonstrated leadership in automotive software make us ideally suited to dominate the market for embedded intelligence in the cars of the future,” said Chen.