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Is Now the Time to Load up on BlackBerry Ltd. Shares?

You have to hand it to BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) CEO John Chen. Since he took over in late 2013, he has slashed costs, refocused the business, and restored profitability. Just last quarter the company posted a profit of US$0.04 per share, even though revenue declined by more than 30% year over year.

That said, there are growing concerns that BlackBerry’s recovery will take longer than previously expected. So, with that in mind, is now the right time to buy BlackBerry?

Disappointing revenue

When Mr. Chen took over, BlackBerry’s survival was in doubt as the company was burning cash left and right. Now the question is a little different: When will the company reverse its decline in revenue?

At this point, that question is a long way from being answered. In the most recent quarter, revenue disappointed across the board. Handset revenues fell below US$300 million, well short of the US$400 million expected by analysts. Software revenue also fell short.

This does not come as a surprise. Analysts at Morgan Stanley and Goldman Sachs both said BlackBerry was gaining little traction with potential customers. In fact, one has to wonder just how strong BlackBerry’s brand is—the company is supposed to be a leader in security, and well regarded by enterprise customers, but the data is saying something very different.

Decidedly vague

During BlackBerry’s conference call, Mr. Chen left out some important details. Notably, when asked how many BES12 customers were added from the EZ Pass program, he replied “I don’t have that number with me.” One analyst called this metric “the single most important number in the company.” I suspect Mr. Chen knows this number, but simply didn’t want to reveal it.

Mr. Chen also didn’t say how many Classic or Passport devices were sold to end users. This was very suspicious. Only days earlier Morgan Stanley Analyst James Faucette speculated that just 8,000 Classic and Passport devices were sold in the quarter, well below expectations. Because Mr. Chen didn’t dispute this number, I think it’s probably true.

I’m now wondering if there’s a lot more bad news to come. BlackBerry shareholders should be very worried.

Are the shares worth buying?

For the following fiscal year, analysts expect US$3.2 billion in revenue for BlackBerry, about a 3% decline relative to this year. Based on this number, the company is trading at a little more than 1.5 times forward revenue.

This multiple would be very reasonable for a lot of companies, especially ones with high growth or profitability. Unfortunately, BlackBerry has neither. So, I must conclude that the company’s shares are pricing in a robust recovery. In other words, if BlackBerry continues to earn only $0.04 per share, the stock is very overpriced.

Consequently, the stock remains extremely risky and I won’t be adding it to my portfolio. Likewise, you should probably look elsewhere.

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Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

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