BlackBerry Ltd (NYSE:BB) Recovers From Lows: Has The Bottom Formed?

BlackBerry Ltd (NYSE:BB) may have been famed for producing mobile phones, but now the company has reinvented itself as an enterprise software company. However, over the course of the past 12 months, the Blackberry stock has declined by as much as 50% due to a range of issues. The steady drop in margins, coupled with the rampant use of non-GAAP measures and the coronavirus crisis, are some of the reasons behind the Blackberry stock’s disappointing performance.

Coronavirus Crisis

The coronavirus pandemic has resulted in lower spending from enterprise customers, and hence, it is important to figure out if Blackberry can start generating more revenues once spending is back up. However, in order to figure out the future, it is necessary to look at the past.

In this regard, it should be pointed out that it was back in 2013 that the company started moving away from its fast-declining smartphone business. Instead, Blackberry moved on to licensing and enterprise software in a big way. It was a tough transition for the company, but in 2019, it managed to generate growth, and in the first quarter, its software and services business constituted as much as 99% of its revenues. That being said, it should also be pointed out that the company’s margins dropped to 73.4% in 2020, from 77.2% in 2019.

Back in 2014, the company had merged its licensing assets under QNX and other assets into the entity that came to be known as Blackberry Technology Solutions (BTS). In Q4 2019, QNX delivered as many as 31 designs wins, and on the other hand, Cylance added as many as 300 new customers. BTS suffered a halt in growth in recent times due to the onset of the coronavirus pandemic. QNX is primarily involved in the automobile industry and earns as much as $20 in royalties from each vehicle sold. However, auto sales have been declining in light of the coronavirus crisis.

Blackberry did not provide projections during a conference call, but it did reveal that the first quarter is expected to be tough. However, its CEO did state that beyond 2021, the coronavirus crisis is not going to have a long term effect on its business. The company might have made a torturous turnaround, but it is still not secure in its new avatar. Hence, it might be better for investors to stick to more established players in the enterprise software space.

About Travis Garlick 1742 Articles
Been writing about and trading stocks since 2013. Manage a group of micro-cap investors on Facebook with over 15,000 members. Turned $8,500 into 185k the first year I started trading stocks and haven't looked back.