BlackBerry Ltd. (TSX:BB)(NYSE:BB), one of the world’s largest cybersecurity and services companies, reported its fiscal 2018 third-quarter earnings results this morning, and its stock has responded by roaring over 10% higher in early trading. Let’s break down the quarterly results to determine if the stock could continue higher from here and if we should be long-term buyers today.
The results that ignited the rally
Here’s a quick breakdown of 12 of the most notable financial statistics from BlackBerry’s three-month period ended November 30, 2017, compared with the same period in 2016:
|Metric||Q3 2018||Q3 2017||Change|
|Enterprise Software & Services revenues (non-GAAP)||US$106 million||US$99 million||7.1%|
|BlackBerry Technology Solutions revenues (non-GAAP)||US$43 million||US$43 million||0%|
|Licensing, IP, & Other revenues (non-GAAP)||US$50 million||US$30 million||66.7%|
|Handheld Devices revenues (non-GAAP)||US$9 million||US$62 million||(85.5%)|
|Service Access Fees revenues (non-GAAP)||US$27 million||US$67 million||(59.7%)|
|Total non-GAAP revenue||US$235 million||US$301 million||(21.9%)|
|Non-GAAP gross profit||US$180 million||US$210 million||(14.3%)|
|Non-GAAP gross margin||76.6%||69.8%||680 basis points|
|Non-GAAP operating income||US$16 million||US$12 million||33.3%|
|Adjusted EBITDA||US$35 million||US$37 million||(5.4%)|
|Non-GAAP net income||US$16 million||US$9 million||77.8%|
|Non-GAAP earnings per share (EPS)||US$0.03||US$0.02||50%|
Reiteration of its guidance
In the press release, BlackBerry reiterated its guidance for the full year of fiscal 2018; here’s a breakdown of what it expects to accomplish:
- Total non-GAAP revenue in the range of US$920-950 million, but it added that it expects its results to come in at “the mid to higher end of that range.”
- Total non-GAAP software and services revenue growth in the range of 10-15%.
- Positive non-GAAP EPS for the full year.
- Positive free cash flow for the full year.
What should you do now?
It was a good quarter overall for BlackBerry given the impact of its transition into a pure-play software company, and it was highlighted by record software and services revenue and total company gross margin. The company’s results also beat analysts’ expectations, which called for breakeven adjusted EPS on revenue of US$214.6 million, so I think the +10% pop in its stock is warranted.
I think BlackBerry’s stock could continue higher from here, because I think its position in the cybersecurity and autonomous vehicle industries will be key drivers of revenue growth and profitability in the years ahead, so Foolish investors should consider initiating positions today with the intention of adding to those positions on any weakness in the trading sessions ahead.
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Fool contributor Joseph Solitro has no position in any stocks mentioned. The Motley Fool owns shares of BlackBerry. BlackBerry is a recommendation of Stock Advisor Canada.