Shares of BlackBerry (TSX:BB) have fallen substantially in the last few months. While the rest of the TSX today climbed in November and December, BlackBerry stock has shrunk more and more — especially after recent earnings results.
Today, let’s get into why BlackBerry stock fell in the first place and whether investors should see this as a buy or beware.
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What happened?
Shares of BlackBerry stock fell as the company reported a loss of US$21 million during the third quarter, as the company continued to work on splitting up its business. The loss was enormous compared to the year before when BlackBerry stock reported a loss of US$4 million.
The company did manage to increase its revenue for the quarter to US$175 million compared to US$169 million the year before. However, the company also called off its plans for an initial public offering (IPO) for its Internet of Things (IoT) business. While it’s still planning to split it from the cybersecurity division, it’s now unclear when.
Yet perhaps the worst news was that for yet another consecutive quarter, the company cut its revenue guidance for its connected vehicle software. This came from its IoT business, which is likely why there will be a delay in its IPO. It now expects between US$62 million and US$66 million, bringing full-year revenue to between US$211 million and US$215 million.
Analyst thoughts
As the company sees these elements continue to decline, analysts believe the company will continue to see the share price do the same. Near-term headwinds are now making it difficult to break even and reach set-out guidance. So, additional financing may be needed but could be expensive.
Analysts, therefore, dropped their long-term fiscal revenue estimates for the company, some as much as almost US$100 million. So, what can save it? Some analysts suggested aggressive restructuring could be a result.
For now, the focus is on the separation of cybersecurity and IoT. While this has begun, it’s now unclear when this could happen, given the market environment and the company’s performance. So, should investors stay away? Or could this be an opportunity in the making?
Are you in or out?
BlackBerry stock is now positioning itself as very different from the smartphone maker. But this takes work. The company will need to continue to find ways of bringing visibility to the stock. And that can be quite difficult in a very competitive field.
That being said, its WNX software for vehicles and driver-assistance systems leads the market. It already performs well in regulated industries such as the government and financial services and, therefore, has proven its security and privacy holds up.
The business is turning around then, but there remain some disappointing results in terms of solid growth. So, while it’s doing well in regulated industries, it will need to find a broader base if it hopes to expand even further. And after so many acquisitions, part of this should be a focus on organic growth to spur the company further.
So, is it a buy? If you wait long enough, BlackBerry stock could certainly see a turnaround — especially at these levels. And if you hold it, certainly don’t drop it at its lowest. But if you’re going to need the cash anytime soon, this stock likely isn’t right for you.
