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Shares of BlackBerry (BB) have trailed the broader markets by a wide margin in the last decade. BlackBerry was once the largest mobile device manufacturer in the world but lost the smartphone race to Apple (AAPL), Samsung, and a slew of Chinese manufacturers.
In late 2016, BlackBerry exited the smartphone manufacturing business to focus on its high-margin software solutions business, which drove investor optimism higher. However, since the start of 2017, BlackBerry stock has fallen over 50%. The tech stock is down 12.4% year-to-date, while most broader indices are just about 2% away from all-time highs.
Let’s see if BlackBerry stock can stage a comeback in the next 12 months.
How Did BlackBerry Perform in Fiscal Q4 of 2024?
In its early April release, BlackBerry reported revenue of $173 million for fiscal Q4 of 2024 (ended in February), up from $151 million in the year-ago period. Its adjusted earnings per share also improved to $0.03 in Q4, compared to a loss of $0.02 per share in the same period last year. BlackBerry beat analyst revenue and earnings estimates in the February quarter, resulting in an uptick in share prices.
BlackBerry’s IoT (Internet of Things) sales touched a quarterly record of $66 million, rising 25% year-over-year while maintaining a gross margin of 85%, higher than the overall margin of 75%.
Moreover, cybersecurity sales grew by 5% to $92 million, indicating a margin of 65%. The company’s annual recurring revenue (ARR) for cybersecurity sales rose by 3% sequentially to $280 million. A steady uptick in ARR should help BlackBerry record stable cash flows across market cycles.
BlackBerry ended fiscal Q4 with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $21 million, indicating a margin of 12%. In the prior-year quarter, it reported an EBITDA loss of $12 million.
In fiscal 2024, BlackBerry reported full-year revenue of $853 million, up from $656 million in 2022. It ended the year with a cash balance of $298 million while operating cash flow declined by 52% to $15 million.
Is BlackBerry Stock Undervalued?
While BlackBerry has improved its financials in fiscal 2024, it continues to report a GAAP (generally accepted accounting principles) loss. Moreover, a high gross margin for the software company has not yet translated to positive cash flow.
BlackBerry derives the majority of its sales from the cybersecurity segment. However, sales from this business rose just 5% year over year. Comparatively, peers such as CrowdStrike (CRWD) are growing at a much faster pace, which suggests that BlackBerry is losing market share in a fast-growing business vertical.
Despite moving away from the low-margin smartphone segment, BlackBerry is forecast to report adjusted losses of $0.04 per share in fiscal 2025. Additionally, Wall Street expects sales to fall to $600.9 million in the next 12 months.
What is the Target Price for BlackBerry?
Each of the six analysts covering BlackBerry stock has a “hold” recommendation. The average target price for BB stock is $3.49, indicating an upside potential of over 12% from current levels.
All things considered, I believe there are far better stocks than BlackBerry that you can consider investing in right now.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
