Should You Buy BlackBerry Ltd. Ahead of Earnings?

Why BlackBerry Ltd. (TSX:BB)(NYSE:BB) could be a great buy before the company releases its Q3 earnings later this month.

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BlackBerry Ltd. (TSX:BB)(NYSE:BB) is releasing its quarterly earnings later this month, and investors might be wondering if it is a good idea to buy the stock before then. A good earnings result could send the shares up in price, while a bad result could send the stock reeling.

The danger with earnings results is that it’s sometimes hard to predict how markets will respond. Even if BlackBerry has a good performance in the quarter if the guidance is downgraded or it fails to meet expectations, that could be enough to send the stock down.

That’s why it’s important to consider how the company is currently valued, its prospects for growth, and how it has done recently.

Good value buy for a tech stock

I’ll start by looking at the company’s current valuation. With the stock trading at 14 times its earnings and 2.5 times its book value, it offers investors a decent value. Normally, tech stocks would be valued at much higher multiples, but with BlackBerry still rebuilding and reforming its brand, investors are likely hesitant to buy the stock at a premium.

Lots of growth potential as technology continues to change the auto industry

Year to date, the stock has risen more than 40% and 17% in just the past three months after it posted strong Q2 results. There could be more growth on the way for BlackBerry, as the company focuses on developing its QNX software, which will be used in self-driving vehicles.

Self-driving technologies are still in the early stages, and with BlackBerry already deeply involved in the development, it could ensure that the company is at the forefront of that revolution and provides manufacturers with a familiar and trusted name to partner with.

Recent results suggest the company’s turnaround has been successful

After seeing big losses a year ago, BlackBerry posted a small profit in Q2, which built on its progress in Q1. With two periods now in the black, the tech company is looking to string together a third straight positive result that can prove to investors that the stock is once again a good long-term investment.

One thing investors can look to as proof of the company’s turnaround is its software sales. Revenues of $185 million across its software segments in Q2 were a record high for the company and made up 77% of all sales, as opposed to just 41% in the prior year.

The company also cleaned up its financials and was able to bring down operating expenses by 22%. BlackBerry has done a good job of tightening up operations, while also refocusing its efforts towards software and services and away from hardware sales.

Should you buy BlackBerry?

Since the company released its Q2 results, the stock has increased 15%, and a strong Q3 could send the stock even higher. There’s a lot to like about BlackBerry from both a value perspective and a growth one.

The company has faced many challenges over the years, but the stock has proven to be resilient, and it could see some significant upside as self-driving technologies continue to progress.

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 David Jagielski has no position in any stocks mentioned.

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