Take a pass on BB stock, says RBC

Canadian software and security company BlackBerry (BlackBerry Stock Quote, Charts, News, Analysts, Financials TSX:BB) delivered a nice profit in its latest earnings report, sending the stock higher. But the results weren’t enough to impress analyst Paul Treiber of RBC Capital, who lowered his target on BlackBerry.

BlackBerry reported its fiscal first quarter 2024 results on Wednesday for the period ended May 31, 2023, coming in with revenue of $373 million compared to $168 million a year ago and $151 million for the previous quarter. The company said the boosted topline came from increases in billings and pipeline, strength from its government business and growth in its Cybersecurity segment.

“In our IoT business unit we saw some temporary delays to the start of new programs as a number of customers review their plans to capitalize on the software-defined vehicle (SDV) trend, impacting revenue this quarter. However, we see no change to the strong secular trends that are a multi-year tailwind for QNX and BlackBerry IVY. We continue to expect to achieve revenue consensus for both our IoT and Cybersecurity business units this fiscal year,” said BlackBerry Executive Chair and CEO John Chen in a press release

By segment, BB generated $93 million in revenue from Cybersecurity compared to $113 million a year earlier, $45 million from IoT compared to $51 million a year earlier and $235 million in Licensing and Other revenue compared to $4 million a year ago.

But the rise in revenue came due to the one-time proceeds from BlackBerry’s sale of patents, where the company sold non-core patents and applications to Key Patent Innovations Limited for $218 million.

Adjusted earnings for the period were $35 million or $0.06 per share compared to a net loss of $31 million or negative $0.05 per share a year earlier.

BlackBerry’s share price was temporarily boosted by the meme stock phenomenon in 2020 and 2021, but the stock has fallen on hard times more recently, going from about $13.00 per share two years ago to about $7.00 at this time last year before hitting a low of about $4.50 at the end of December, 2022. Shares rallied from there, however, and are now in the $6-$8 range.

Treiber has issued a “Sell” rating on BlackBerry as opposed to the previous “Hold” and has set a lowered price target of $4.50 per share, which at press time represented a negative return of 32 per cent.

BlackBerry’s business, formerly in cell phones, is now focused on intelligent security software and services, with Internet of Things connected tech for the auto industry, among others, and cybersecurity, safety and data privacy solutions for enterprise and government clients.