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Should You Buy, Sell, or Hold BlackBerry Ltd. Following its Surprising Q4 Profit?

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY), one of the largest mobile communications companies in the world, announced fourth-quarter earnings results for fiscal 2015 on the morning of March 27, and its stock responded by rising over 2.5% in the trading session that followed. Let’s take a thorough look at the results to determine if we should consider buying in to this rally, or if we should wait for a better entry point in the trading sessions ahead.

Breaking down the mixed fourth-quarter results

Here’s a summary of BlackBerry’s fourth-quarter earnings results compared to what analysts had expected and its results in the same period a year ago. All figures are in U.S. dollars.

Metric Reported Expected Year-Ago
Adjusted Earnings Per Share $0.04 ($0.04) ($0.08)
Revenue $660 million $786 million $976 million

Source: Financial Post

In the fourth quarter of fiscal 2015, BlackBerry reported an adjusted net profit of $20 million, or $0.04 per share, compared to a net loss of $42 million, or $0.08 per share, in the same quarter a year ago, as its revenues decreased 32.4% to $660 million. The company’s steep decline in revenue can be attributed to it selling just 1.6 million smartphones to customers in the fourth quarter, down 52.9% from the 3.4 million sold in the year-ago period. BlackBerry’s surprise net profit can be attributed to it achieving its expense reduction target one quarter ahead of schedule.

Here’s a quick breakdown of eight other notable statistics and updates from the report compared to the year-ago period:

  1. Recognized hardware revenue on approximately 1.3 million BlackBerry smartphones, unchanged from the year-ago period
  2. Average selling price of BlackBerry smartphones increased 17.2% to $211
  3. Reported an adjusted operating profit of $2 million, compared to an operating loss of $156 million in the year-ago period
  4. Adjusted gross margin expanded 10 basis points to 48.3%
  5. Reported normalized positive cash flow of $76 million, compared to a normalized cash use of $784 million in the year-ago period
  6. Purchase orders with contract manufacturers totaled approximately $394 million at the end of the fourth quarter, a decrease of 30.3% from the end of the third quarter
  7. Reported $3.27 billion in cash, cash equivalents, and investments at the end of the quarter, an increase of 22.8% from the end of the year-ago period, and matching the highest balance in its history
  8. Total common shares outstanding increased 0.4% to 528.8 million

What should investors do with BlackBerry today?

I think there is plenty of room left to the upside for BlackBerry’s stock given the fact that it still sits more than 21% below its 52-week high. The company’s cost-cutting program has been highly successful thus far, which will likely lead to further profitability in fiscal 2016.

With all of the information provided above in mind, Foolish investors should watch BlackBerry’s stock closely and strongly consider beginning to scale in to long-term positions on any weakness provided by the market.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

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