BlackBerry Surprises Street With 3Q Profit; Analysts Remain Sidelined

BlackBerry Limited reported better-than-expected 3Q results. The enterprise software provider posted adjusted earnings of $0.02 per share, comparing favorably to analysts’ expectations of a loss of $0.01 per share. However, its quarterly earnings experienced a year-over-year decline of 33.3%.

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BlackBerry’s (BB) 3Q non-GAAP revenues fell 20% to $224 million year-on-year. However, it came in ahead of the Street’s estimates of $219.7 million. The company said that the year-over-year top-line decline was mainly due to lower Licensing revenues.

Notably, the company’s Software and Services business unit impressed. Although the segment’s revenues fell on a year-over-year basis, it registered improvement sequentially. (See BB stock analysis on TipRanks)

BlackBerry CEO John Chen said, “We are pleased to report solid financial results this quarter, delivering sequential software and services revenue growth in line with our outlook. This quarter we delivered exciting new technology releases, especially our AI-driven BlackBerry Cyber Suite. We also made significant progress with partnerships.”

Ahead of its earnings release, RBC Capital analyst Paul Treiber raised the stock’s price target to $7.50 (9.2% downside potential) from $5, while reiterating a Hold rating. In a note to investors on Dec. 15, Treiber pointed out that the recent rally in its share price reflects investors’ eagerness for a value stock and was not because of improving expectations for 3Q results. The analyst cautioned that BlackBerry’s fundamental challenges limit the scope for further valuation multiple expansion.

Overall, the Street is sidelined on the stock. The Hold analyst consensus is based on 3 Holds. The average price target stands at $6.96 and implies downside potential of about 15.7% to current levels. Shares have gained 28.7% year-to-date.