BlackBerry is still a wait-and-see stock, this investor says

BlackBerry (BlackBerry Stock Quote, Chart TSX:BB) saw its share price vault ahead on Friday as investors reacted to good news from their recent quarter. But the stock remains a wait-and-see proposition, says Ryan Modesto of 5i Research, who thinks that volatility is still an issue.

“In the past, we haven’t been a huge fan of BlackBerry just because it swings so wildly from quarter to quarter so it’s been a hard one to get a pulse on. But this quarter looked really good,” says Modesto, CEO of 5i Research, to BNN Bloomberg on Friday.

BlackBerry jumped 13 per cent on Friday as the company reported revenue for its fiscal fourth quarter of $255 million, which was up from last year’s Q4 top line of $233 million and better than analysts’ consensus estimate of $241.3 million. Profit was also a consensus beat at $51 million or 11 cents per share versus the Street’s six cents per share. For the fiscal 2018 year, BlackBerry reported a profit of $95 million on revenue of $904 million. (All figures in US dollars.)

Notably, the 2018 financials did not include revenue growth from BlackBerry’s recent acquisition of cybersecurity company Cylance, which will help push BB’s top line, says CEO John Chen.

“We delivered on all of our fiscal 2019 financial commitments and created a solid foundation for continued profitable revenue growth in fiscal 2020,” stated Chen, in a press release. “The combination of BlackBerry Cylance’s lightweight AI and machine learning cybersecurity capabilities with BlackBerry Spark, our secure communications platform, will make our endpoint management and embedded software products stronger and more essential for enterprises to generate value from the Internet of Things.”

Modesto says even though questions persist, there’s a lot going right for BlackBerry.

“Their earnings beat estimates by 90 per cent and it sounds like their security software is gaining a lot of traction right now. In the quarter they got a lot of business from the financial services sector, which is interesting. It looks like the turnaround might be gaining some traction,” Modesto says.

“I’m not quite comfortable with it yet to say that I’d rush in to own this because there have been times when they’ve had a good quarter over the last year or two and then you see it pull back pretty aggressively. But it’s definitely time to start sharpening your pencil on this one,” he says. “And it’s in our backyard of Waterloo, as well, so we have to like it a little bit.”