BlackBerry: On The Cusp Of ATurnaround?

BlackBerry (NASDAQ:BBRY) released their third quarter fiscal 2015 earnings report on December 19th. The wireless phone and software company continued to report losses this year as it struggled to compete with Apple's (NASDAQ:AAPL) iPhone , though some are optimistic that BlackBerry is on the cusp of a big turnaround.

Highlights from the Q3 2015 report include earnings per share of $0.01 on a non-GAAP basis and cash flow of $43 million, a quarterly increase of $7 million. The non-GAAP profitability and positive cash flow are substantial breakthroughs for the company. However, BlackBerry posted revenue of $793 million, a 34% year-over-year decrease, well below analysts’ estimates of $931.5 million. The majority of revenue is attributed to hardware and services sales, with BlackBerry reporting approximately 1.9 million smartphones sold in the third quarter.

CEO John Chen stated, “We achieved a key milestone in our eight quarter plan with positive cash flow. We also attained another important milestone in the release of our new enterprise software products and devices. Our focus now turns to expanding our distribution and driving revenue growth.” Chen was appointed CEO of the struggling company in November of 2013 and has been an integral player in turning the company around.

On December 19th Blackberry also announced its acquisition of Secusmart, a security solutions company often employed by government organizations. The acquisition allows BlackBerry to strengthen its “leadership in secure enterprise mobility with Secusmart’s encryption and anti-eavesdropping capabilities” and bolster its “end-to-end offerings that provide the highest level of security from the device to the management platform.” This purchase comes at an opportune time since Sony's (NYSE:SNE) cyber hack attack is fueling the media's scrutiny of cyber security issues.

Analyst Maynard Um of Wells Fargo reiterated a Market Perform rating on BlackBerry with a price target of $10 on December 19. Um noted that hardware sales were only $365 million, falling $27 million below his estimates. However, BlackBerry’s service revenue of $375 million was not far off his estimate of $370 million. The analyst believes that the BlackBerry Classic, the newest smartphone release, will benefit cash flow if it can be distributed on a broader basis.

Um has a 69% overall success rate recommending stocks with a +15.4% average return rate per recommendation on TipRanks.


Separately on December 19th, analyst Timothy Arcuri of Cowen & Co. also reiterated a Market Perform rating on BlackBerry though he did not provide a price target. Arcuri noted that the $0.01 EPS was “driven by a second consecutive quarter of positive non-GAAP gross margin in Hardware.” However, the analyst remains cautious noting, “Software growth remains the critical driver of the long-term turnaround and near-term transition momentum is heavily reliant on Hardware growth.”

Arcuri, via TipRanks, has a 75% overall success rating recommending stocks with an average return of +17.7% per recommendation.


The top analyst consensus on TipRanks for BBRY is Hold.

Via analyst recommendations, it seems that BlackBerry is on the cusp of a turnaround, but will it ever reclaim its place as a wireless communications powerhouse?

Disclosure: BBRY recommendations sourced via TipRanks