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Is There Any Reason to Bet on BlackBerry Ltd. Today?

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY), one of the largest mobile communications companies in the world, announced first-quarter earnings results on the morning of June 23, and its stock responded by falling about 3%. Let’s take a closer look at the quarterly results to determine if we should consider using this weakness as a long-term buying opportunity, or a warning sign.

Weak smartphone sales leads to disappointing results

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

Metric Q1 2016 Actual Q1 2016 Expected Q1 2015 Actual
Adjusted Earnings Per Share ($0.05) ($0.03) ($0.11)
Revenue $658 million $679 million $966 million

Source: The Canadian Press

In the first quarter of fiscal 2016, BlackBerry reported an adjusted net loss of $28 million, or $0.05 per share, compared with an adjusted net loss of $60 million, or $0.11 per share, in the same period a year ago, as its revenue decreased 31.9% to $658 million. These weaker-than-expected results can be attributed to the company selling just 1.1 million BlackBerry smartphones during the quarter, a decrease of 31.3% from the 1.6 million sold in the year-ago period.

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

  1. Hardware revenues decreased 30.6% to $263 million
  2. Service revenues decreased 51.4% to $252 million
  3. Software and Technology Licensing revenues increased 153.7% to $137 million
  4. Other revenue decreased 57.1% to $6 million
  5. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 4.7% to $157 million
  6. Adjusted EBITDA margin expanded 840 basis points to 23.9%
  7. Net cash provided by operating activities decreased 55.6% to $134 million
  8. Free cash flow decreased 55.4% to $123 million

Should you buy BlackBerry on the dip?

It was a very weak quarter for BlackBerry, so I think its stock has responded correctly by moving lower. I also think it could continue much lower from here because there are no catalysts of growth for the company going forward, which will likely lead to three more disappointing and unprofitable quarters in fiscal 2016. I think the only way investors could generate significant returns from BlackBerry is if it were taken over, but that is not reason enough to buy the stock today.

With all of the information provided above in mind, I think Foolish investors should avoid establishing positions in BlackBerry today.

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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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