BlackBerry Still Fighting the Good Fight

Shares of BlackBerry NYSE: BB have been on a downward slope since 2008 but last Friday’s Q3 report suggests management believe the tide could be turning. Non-GAAP EPS was just about in the black and narrowly beat estimates while revenue jumped over 20% year on year and came in above the consensus as well. For a company that was frog marched into near obscurity by the advent of Apple’s iPhone over a decade ago, they’re still fighting the good fight, albeit a losing one for now.

Having rallied 600% in two years through the middle of 2008, investors must have thought the good times were there to stay especially considering that move came on top of an 800% move in the three years prior to 2006. However, it’s been a bleak decade and change since with the stock now back trading at 1999 levels. A stark inability to compete with the touchscreen generation of smartphones was the primary driver behind the company’s fall from grace.

Fresh Faces and Fresh Initiatives

That being said though, they’re still swinging and some fresh faces have come into leadership in recent months. The COO, CIO, and CSO have all been replaced in a shake-up and management took the bold step last week to even raise forward guidance for the financial year.

CEO John Chen remarked on how "BlackBerry achieved sequential growth in revenue across all of our software businesses while generating healthy non-GAAP profitability and free cash flow as we continue to invest in our future. Our pipeline is growing as we deliver against our product roadmap and execute on our go-to-market expansion.”

The company that once led the smartphone revolution has been busy pivoting to new solutions and industries. For example, it’s putting its AI/machine learning technology to work in collaboration with Jaguar Land Rover on their next generation of vehicles. This comes after reports last June that the company’s QNX software had been installed in over 150 million cars, a 25% jump from the same report in 2018.

The recently completed BlackBerry World Tour 2019 covered three continents and was focused on repositioning the company as well as boosting awareness of their offerings.

Uphill Battle Remains

Can they reinvent themselves as a tech startup? With new C-level executives at the table and more than 20% year on year revenue growth, it kind of feels like that’s what they’re trying to do. Even a well-known Blackberry bear, Bank of America, has acknowledged the strides the company has been making of late. They were out in November saying they saw limited further downside and a likely floor of support around the $5 mark and went so far as to raise their price target to $7.

This $5 level is exactly where shares bounced in early October and in the three months since are up over 30% with most of the move coming after last week’s earnings beat.

For all this positive momentum, however, after a 50% fall from last year’s highs, Wall Street remains understandably neutral on the stock. It looks like they’re simply waiting to see what the company can come up within the coming quarters before committing one way or another. Perhaps Macquarie said it best when they noted in August how “BlackBerry suffers from a ‘what is it?’ issue where, from a 10,000-foot view, it appears to be an amalgamation of discrete assets that have few synergies across the portfolio”.

The problem for management as they try to build on this earnings report into 2020 is that it feels like they need to be right and beat expectations every quarter to keep the momentum going, whereas the bears just need one miss to send the stock back down towards all-time lows.

Technically speaking, even though it recently crossed above the 50-day moving average and MACD is still positive, the stock is within touching distance of a heavy downtrend that’s been in play since January last year. There’s also strong resistance in the mid $6s where the stock found support multiple times over the past seven years.

With all this in mind, BlackBerry is a stock worth keeping on the watchlist out of morbid curiosity alone.