BlackBerry’s turnaround has fizzled out, this investor says

After a stellar back end to 2017, it’s been a disappointing 2018 for BlackBerry (BlackBerry Stock Quote, Chart TSX, NYSE:BB), whose stock has dropped over 40 per cent since an early January high. But don’t think the tech company is a buy just yet, says Ross Healy of Strategic Analysis Corporation, who claims there’s more downside yet to come.

BlackBerry made a splash last month by announcing the acquisition of cybersecurity company Cylance for $1.4 billion, the largest purchase in company history and one which CEO John Chen said would vault BB into the global top-tier when it comes to security software. (All figures in US dollars.)

“We intend to be the number one player in the world,” said Chen. “If you look at it, we are now one of the biggest players with a billion dollars in software and services and the majority of that in cybersecurity. We have aspirations for growth and this is the reason why we did this.”

So far, however, the market hasn’t reacted positively to the move, dropping the stock a further nine per cent since the November 16 announcement.

And though the company may look a lot different from the handset maker of years gone by, there’s little to show for the turnaround now more than five years out, says Healy, chairman and portfolio manager at Strategic Analysis Corporation.

“When John Chen originally came in and started to ‘turn this thing around,’ I kept looking for really good things, but what has happened is that Chen hasn’t been able to turn the fundamentals of the company around, and the earnings still haven’t come like we’ve all been rooting for,” says Healy, in conversation with BNN Bloomberg.

“Recently, the stock had been running along one of our technical resistance lines and it has broken down through that, which tells me that maybe $9 is coming. And I would wait for that,” he says.

BlackBerry’s last reported quarter came in late September, with the company beating analysts’ expectations on earnings with a profit of $43 million and adjusted earnings of $0.04 per share compared to the consensus $0.01 per share. But the company’s revenue decreased by 12 per cent year-over-year to $210 million, attributed to lower revenue from service access fees from its mobile operating system software.