This $9 Stock Is Getting the Attention of Analysts
BlackBerry Limited (NYSE: BB) shares have soared this year. The company has also managed to surpass EPS estimates in 12 consecutive quarters, with an average surprise of 108% in the trailing four periods.
The company is best known for its once-iconic brand of smartphones, but it recently did away with hardware manufacturing and now operates as an enterprise software and services company. This transition, along with impressive earnings, is finally getting the attention of analysts.
The company’s licensing and intellectual property revenue, which includes revenue from licensing existing patents to other companies, jumped 71% to $99 million. Overall revenue rose to $255 million, and earnings were 11 cents per share.
Analysts were expecting revenue of $241.1 million and earnings of 6 cents per share.
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John Chen, executive chairman and CEO, BlackBerry, said: “We delivered on all of our fiscal 2019 financial commitments and created a solid foundation for continued profitable revenue growth in fiscal 2020.”
The shift to software has benefited BlackBerry’s stock price in recent months.
Several analysts have reacted to the company’s earnings and guidance:
- TD Securities’ Daniel Chan maintains a Buy rating on Blackberry with a price target lifted from $14 to $14.50.
- MKM Partners Michael Genovese maintains at Neutral, fair value estimate lifted from $8.50 to $11.
- Morgan Stanley’s James Faucette maintains an Equal-Weight rating on Blackberry with an unchanged $10 price target.
“Blackberry’s fourth-quarter earnings is highlighted by the IP licensing segment showing revenue of $99 million versus expectations of $80 million, Faucette said in a research report.
The segment represents the “primary upside driver” and is now becoming a more reliable contributor of revenue.
Other segments came in mixed, including Enterprise Software and Services (ESS) falling short of expectations although it did face difficult comparisons from ASC 606 accounting changes.
Blackberry Technology Solutions (BTS) came in as expected, but management’s guidance for Cylance disappointed as the company reported revenue of $170 million versus expectations of $198 million. The newly acquired business is also expected to be dilutive to earnings in fiscal 2020.”
Canaccord analyst, Michael Walkley, believes BlackBerry has “successfully built a technology licensing business that management believes is sustainable above $250M annually.”
Moving forward, Walkley says he continues to “anticipate potential for improving predictability and solid longer-term growth given the improving base of quarterly recurring revenue.”
Overall, BlackBerry is proving itself as a worthy investment since transitioning to an enterprise software and services company.
BB should be considered a buy if momentum increases.
Look for an entry at $9.68 with a price target of at least $10.96 based on the pattern in the chart.