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Why BlackBerry Ltd. Is Surging Over 10%

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.

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