What to Expect from BlackBerry Ltd. in Q2 Results

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) is set to announce earnings for the most recent quarter later this month, and investors and analysts alike hold increasingly negative viewpoints on how the company’s performance will ultimately be.

Skeptics of BlackBerry (and there are many of them) are expecting the company to post lower results, primarily due to lower-than-expected enterprise sales that were witnessed in the last quarter as well as the decreasing amount of revenue associated with both hardware and system access fees.

This upcoming quarter will also mark one year since BlackBerry stopped making and selling hardware directly, opting instead to licence certain partners to develop and bring to market new handsets with the BlackBerry name.

Ahead of Q2: the numbers

Analysts are largely expecting the slump that BlackBerry entered in the previous quarter to persist. In the last quarter, BlackBerry reported $244 million in revenue, falling short of the $263 million that analysts were forecasting. CEO John Chen attributed much of that miss on a smaller sales force — something he noted would be greatly expanded over the next few quarters as the focus turns to growing sales.

Irrespective of whether there are new additions to help with Q2 numbers, analysts are largely forecasting little growth in the next quarter, with consensus among analysts maintaining a hold rating on the stock.

Why you should consider BlackBerry

Earlier this month, we saw the announcement of the iPhone X, which, despite offering a host of new capabilities to the iOS platform, didn’t offer anything new or compelling to the market, apart from breaking the $1,000 price point.

By comparison, BlackBerry’s KeyOne device is less than half the price of the iPhone X and is in a more secure and arguably more durable casing that isn’t made of glass, with innovative security and productivity features that competitors still lack.

While BlackBerry doesn’t sell any phones directly anymore, the company is still working with partners to release new devices, and rumours are pointing to an announcement of a new partner-built device next month. With KeyOne sales numbers not formally announced but estimated to be better than expected, a new device launch could be a vote of confidence for the BlackBerry mobile unit.

Devices aren’t the focus of BlackBerry anymore — enterprise security and IoT are. BlackBerry Radar, the IoT asset-tracking solution offered by the company remains an intriguing yet simple solution to the problem of tracking remote assets and corresponding data in real time. Better yet, Radar contributes to BlackBerry’s bottom line in two ways: there’s the upfront cost of the hardware and the ongoing subscription cost.

Recurring revenue is something that Chen has instilled into segments of the company. Enterprise customer orders are often referred to in numbers of recurring orders, and an update on that figure is likely to follow in the announcement later this month. In the last quarter, numbers were lower than expected, coming in at just over 3,000 orders for the quarter, down from the 3,500 announced in the previous quarter.

If Chen made good on his pledge to up the salesforce, expect to see some gains on this front in the quarterly announcement, but a significant increase is unlikely for a few quarters.

Is BlackBerry a good investment?

BlackBerry has advanced significantly over the past few years, shedding the hardware-first perception of the company and replacing it with a series of new segments that hold plenty of potential for the next decade.

In short, comparing the BlackBerry of today with the BlackBerry of several years ago is futile, as they are completely different companies with different revenue streams.

Investors that can look solely at the current company and the opportunity it poses will have no problem allocating a small investment.

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Fool contributor Demetris Afxentiou has no position in any stocks mentioned.


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