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BlackBerry (BB) shares have plunged some 54% year to date, while dropping 52% over the past twelve months. And if you’ve bought and held the stock in the past three and five years, you’re likely down 25% and 60% in both spans, respectively.
Aside from the execution challenges, including prolonged revenue declines, investors have grown frustrated with the management’s inability to generate the company’s identity. It has been nine years since CEO John Chen assumed control of the former smartphone giant. The market is still waiting for BlackBerry’s second act to warrant any applause. Investors who have watched this dance of “two steps forward and one step back” aren’t holding their breath for things to turn around when the company reports third quarter fiscal 2023 earnings results after Tuesday’s closing bell.
Growth in the company’s Enterprise Software Services segment (its largest business) has been the major cause of frustration and it doesn’t appear as if things will immediately improve. Wall Street analysts have been busy slashing their projections ahead of Tuesday’s release, driven by prolonged weakness in the cybersecurity segment, which has spanned several quarters. The company is expected for a 8% year-over-year decline in revenue for the just-ended quarter. Notably, this would be the ninth consecutive quarter with declining revenue.
Nevertheless, the management aims to hit revenue of $1.2 billion in fiscal 2027, believing it has an enormous opportunity to service customers in need of device security as the number of connected devices continue to grow. However, the company has not shown it can make significant cybersecurity strides to capture that sort of market share. Nevertheless, with BlackBerry stock still down so much this year, the market will want to see whether its fundamentals can justify a higher price.
For the quarter that ended November, analysts expect BlackBerry to lose 7 cents per share on revenue of $168.73 million. This compares to the year-ago quarter when earnings were 0 cents per share on revenue of $184 million. For the full year, ending February, the loss is expected to be 19 cents per share, compared to loss of 10 cents a year ago, while full-year revenue of $689.11 million would decline 4% year over year.
As noted, the market is still waiting for quarterly and annual revenues to show improvement. While the company has done a decent job carving a solid niche within the security segment, the constant underperformance has raised doubts that the company has the right leadership to grow revenue in its Enterprise Software Services segment. But it hasn’t been all bad news. Even as revenue performance has been discouraging, the company still produced several quarters of positive cash flow.
The market is nevertheless struggling to see if the company can develop any competitive advantages in the areas where it relies on revenue the most. BlackBerry has invested in ways to grow brand equity, evidenced by the Q2 rise in selling, marketing, and administration expenses in compared to the previous quarter. However, the increased costs has also pressured its near-term profit margins, which has lead to multiple quarters of losses.
In the second quarter, the company produced another loss of 5 cents per share, though it surpassed consensus by 2 cent. Q2 revenue of declined 4% year over year to $168 million, but topped estimates by $3.36 million. During the quarter, revenue in the company’s Internet-of-Things segment rose 11% year over year, offsetting an 8% drop in cybersecurity revenue.
The company’s persistent struggle to grow demand for its security products was again noticeable. Investors on Tuesday will want to see improved trends in these key areas, along with stronger fundamentals to reverse the slide in the stock price.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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