Has BlackBerry become a stock to avoid?
Those of us waiting for the big BlackBerry (BlackBerry Stock Quote, Chart, News TSX:BB) comeback may have to bide their time a little longer, as it’s still unclear where the newly-formed software company’s growth will come from.
That’s the conclusion from GlobeInvest portfolio manager Christine Poole who is steering clear of the stock for the time being.
BlackBerry has been hanging out in the lower end of its range over the past two months, trading between $9.00 and $10.00 and threatening to go lower than it’s been in years.
It’s a far cry from a couple of years ago when BB was climbing to the $18.00 mark as the market saw promise in the company’s pivot away from making phones and towards selling software and security products.
But that optimism seems to have turned to pessimism, or in the very least uncertainty, about the timeline for the multi-year turnaround, one which CEO John Chen said earlier this year has already run its course.
“When you deem a turnaround successful, that means the business has to be growing. Now, the growing business is usually not the same business that got the company into trouble in the first place,” said Chen to Bloomberg in March. “From a company that does US$6 billion in revenue but losing money and it’s burning cash, to a company that is over US$1 billion in software (revenue) making money and generating cash, I’d say those would be on my resume.”
Still, the market reacted poorly to BlackBerry’s latest quarterly report which seemed to meet expectations but did not wow the crowd with its shiny new cybersecurity acquisition, Cylance. Acquired for $1.4 billion in a deal that closed in February, Cylance’s contribution to BB’s latest quarter was just US$32 million.
Ahead of BlackBerry’s second quarter results due on September 24, the company met analysts’ expectations in its Q1 with revenue of US$267 million, up 23 per cent year-over-year and earnings of US$0.01 per share. In total, BlackBerry has more than tripled the size of its Software business since its days as a handset maker but the segment is growing slowly, expanding by three per cent over the past two years.
Christine Poole says that the jury is still out on BlackBerry.
“It’s a name that we don’t own,” says Poole, CEO and managing director of GlobeInvest Capital Management, who spoke to BNN Bloomberg on Thursday.
“Obviously, the company is transitioning from being a hardware-oriented company to being a software company. They have done it and they’ve been making some acquisitions,” she said.
“But for myself, I don’t have the visibility on how they’re going to grow their top line at this point, so we’ve just stayed away,” Poole said.
Last week, a district court in Los Angeles ruled that two of BlackBerry’s patents were ineligible for protection, another result in the company’s ongoing legal proceedings with Facebook and Snap over a number of features that BlackBerry claims ownership. The company has also filed lawsuits against Twitter, Nokia and Cisco.