2-for1 Sale
In late February, I’d discussed the trajectory of Dollarama Inc. (TSX:DOL) and BlackBerry Ltd. (TSX:BB)(NYSE:BB). Canadian, U.S., and global markets had rebounded somewhat from an early February dip during that period. That momentum has been dashed in the midst of rising trade tensions between the two largest economies in the world.
The two companies have since released fourth-quarter and full-fiscal-year results. How do these stocks look in the early days of April? Let’s examine both and determine if you should stash either in your portfolio today.
Dollarama Inc.
Dollarama stock rose 0.91% on April 2 on a day that saw the S&P/TSX Index shed another 150 points. Shares have dropped 0.30% in 2018 thus far but are up 42% year over year. The company released its fourth-quarter and full-fiscal-2018 results on March 29.
Sales jumped 9.8% year over year in the fourth quarter to $938.1 million, and EBITDA increased 12.2% from the prior year to $253.8 million, or 27.1% of sales. Dollarama also opened 25 new stores in the quarter, which was one less than the same quarter in fiscal 2017. Sales were driven by solid organic sales growth as comparable-store sales growth was reported at 5.5%.
For the full year, sales increased 10.2% to $3.26 billion, and EBITDA jumped 17.5% to $826.1 million. Dollarama met its guidance at the beginning of the year to open 65 net new stores in fiscal 2018. The company also approved a 9% hike of its quarterly dividend to $0.12 per share, representing a 0.28% dividend yield.
In fiscal 2019, Dollarama projects 60-70 new store openings and estimates that capital expenditures will increase to between $150 million and $160 million over the course of the year.
BlackBerry Ltd.
BlackBerry stock fell 6.8% on April 2 and has now fallen 13.8% week over week as of this most recent close. Shares are still up 5.4% in 2018 thus far. The company released its fourth-quarter and full-fiscal-2018 results on March 28.
The company reported record software and services revenue of $218 million in the quarter, and approximately 70% of its software and services revenue was recurring. BlackBerry reported about 3,500 enterprise customer orders in the quarter. CEO John Chen, who has been at the helm of BlackBerry since November 2013, recently accepted a $128 million extension to stay on for at least five more years.
In a recent interview, Chen appeared to be vindicated in his bet on software and security at BlackBerry in the aftermath of the Facebook Inc. data scandal. BlackBerry launched a cybersecurity consulting service in late 2017 and performs services for major public and private sector clients. The cybersecurity industry is expected to report compound annual growth of 9.8%, according to research from MarketsandMarkets.
BlackBerry has projected software and service billings growth to be in the double digits for fiscal 2019 and expects free cash flow to be positive for the full year. This historically volatile stock will likely face headwinds in the midst of broader stock market jitters.
Should you buy Dollarama or BlackBerry today?
In spite of its recent rout, BlackBerry remains attractive for the long term with its impressive footprint in two fast-growing industries. Dollarama, however, is still a pricey option that offers a modest dividend. It is safe to expect solid growth from Canada’s top dollar store chain going forward, but its share price is simply too expensive right now in the midst of global uncertainty. Investors should remain on the sidelines.
