Blackberry stock soars 8% on Q1 revenue beat: Time to buy?

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BlackBerry Ltd (NYSE: BB) saw its stock soar more than 8% in pre-market trading today, following a robust Q1 2024 earnings report released yesterday after markets closed for trading.

This surge was driven by the company’s impressive revenue performance, which beat expectations and underscored the progress BlackBerry is making toward profitability.

The company reported a Q1 revenue of $144 million, surpassing analyst estimates by nearly $10 million, despite a year-over-year decline of 61%.

Blackberry Q1 earnings performance

Despite the positive revenue performance, BlackBerry reported a non-GAAP operating loss of $12 million and a GAAP operating loss of $39 million for Q1 2024.

The adjusted EBITDA was negative $7 million, reflecting ongoing investments in growth initiatives. The non-GAAP loss per share came in at $0.03, in line with analyst expectations, while the GAAP loss per share was $0.07.

BlackBerry’s CEO, John J. Giamatteo, emphasized the company’s strides toward operational independence for its IoT and cybersecurity businesses.

The earnings report highlighted that both divisions exceeded revenue expectations, with the IoT sector growing by 18% year-over-year to $53 million and cybersecurity generating $85 million.

Fundamentally, BlackBerry is showing signs of stability and growth in key areas. The IoT division, driven by the QNX software used in automotive systems, continues to perform well.

The cybersecurity segment, with products like Cylance, has also shown resilience, achieving sequential growth in annual recurring revenue.

The company’s gross margin remained robust at 67%, with IoT gross margin at 81% and cybersecurity at 59%.

BlackBerry’s financial health is bolstered by its cash reserves of $283 million and no debt, providing a solid foundation for future investments.

However, the company faces significant competition from larger tech firms in both IoT and cybersecurity, which may impact its growth trajectory.

Additionally, delays in the automotive industry’s transition to software-defined vehicles pose a challenge to the IoT segment.

The company’s outlook for Q2 2024 projects revenue between $136 million and $144 million, with an adjusted loss per share ranging from $0.02 to $0.04.

For the full fiscal year 2025, BlackBerry anticipates total revenue between $586 million and $616 million.

Blackberry’s valuation under question

Blackberry’s valuation remains a topic of debate among investors. While some see the stock as undervalued given BlackBerry’s potential in the IoT and cybersecurity markets, others are cautious due to the company’s historical performance and competitive challenges.

The stock’s current price reflects a forward EBITDA multiple that some analysts argue is high, considering the company’s modest revenue growth and profitability prospects.

Despite the positive revenue beat and operational improvements, BlackBerry’s path to sustained profitability remains uncertain. Investors will be closely watching BlackBerry’s execution of its strategic initiatives and its performance relative to industry peers.

To further understand the stock’s potential, a look at the stock’s charts is crucial. Examining the charts will help identify key support and resistance levels, which are essential in assessing whether today’s rally has more room to run or if caution is warranted.

Long-term downtrend remains, but don’t short on today’s bounce

Amid the meme stock mania of early 2021, we saw Blackberry’s stock surge rapidly from $6 levels to above $25 in a matter of weeks. This mania was fueled by short-term speculators and so quickly fizzled out.

BB chart by TradingView

Since then, Blackberry’s stock has seen a persistent downtrend to this day. The stock was trading at its all-time low just yesterday.

Hence, it is clear that the stock remains firmly in the grips of bears.

However, investors who think that this short-term bounce can last longer can initiate a long position after today’s opening while keeping a stop loss at yesterday’s low of $2.20.

If short-term bullish momentum sustains, the stock can again reach its recent swing high above $3.50 where one can book profits.

Traders bearish on the stock must ideally not open a fresh short position immediately after today’s surge without observing the price action. If the stock starts giving up today’s gain and retraces back to yesterday’s low fresh short-poitions can be considered.

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