blackberry

BlackBerry stock was trading higher in early price action today after posting better-than-expected earnings in the first quarter of the fiscal year 2023.

FedEx stock is also trading higher despite posting mixed earnings. However, FedEx’s guidance pleased markets at a time when investors are getting increasingly wary of a recession in the US.

BlackBerry posted revenues of $168 million in the quarter, which was less than the $174 million that it had posted in the corresponding quarter last year. Nonetheless, the metric was ahead of the $157.1 million that analysts were expecting.

Meanwhile, BlackBerry posted a net loss of $181 million which it said was primarily due to one-time litigation. On an adjusted basis, the company posted a per-share loss of 5 cents. The company posted negative operating cash flows of $42 million in the quarter that ended May and ended the period with total cash of $391 million.

Key Takeaways from BlackBerry’s earnings

The IoT segment posted revenues of $51 million in the quarter while the Cybersecurity vertical contributed $113 million. Commenting on the earnings, BlackBerry’s CEO John Chen said, “The IoT business maintained its momentum of new design wins in rapidly growing core Auto domains, including Advanced Driver Assistance Systems and Digital Cockpits, and delivered a third consecutive record quarter for pre-production revenues.”

He added, “The Cybersecurity business demonstrated solid traction in the market by recording double-digit year-over-year billings growth.”

Notably, BlackBerry has transformed its business to focus on emerging businesses like cybersecurity and autonomous driving. However, markets haven’t been appreciative of the transformation so far and the stock trades below the price levels when Chen took over as the CEO in 2013.

Meme Stocks Falls as Craze Ends

BlackBerry was among the meme stocks which were pumped by Reddit traders. While some of the stocks discussed by Reddit traders are companies with sound fundamentals, many others had questionable fundamentals.

We’ve seen a sharp crash in all meme stocks over the last year. The sell-off in meme stocks has only intensified in 2022 as traders have exited speculative and penny stocks. The US SEC defines penny stocks as companies that trade below $5. BlackBerry stock trades slightly above $5 and is not a penny stock in a strict sense. It had however fallen into the penny stock category in May.

During the earnings release, BlackBerry also provided guidance for the fiscal year 2023. It said that the IoT segment is expected to generate revenues between $200-$210 million in the year while the cybersecurity business’ revenues should be similar to the fiscal year 2022. The guidance remained unchanged from the previous quarter.

The company is bullish on the long-term outlook for its IoT business and expects revenues to rise at a CAGR of 20% and reach around $307 million by the fiscal year 2025. BlackBerry has partnered with several automotive companies which would drive the segment’s revenues in the long term.

BlackBerry stockholders reject executive compensation plan

Meanwhile, BlackBerry stockholders have rejected the company’s executive compensation plan. Also, many stockholders voted against the reelection of Prem Watsa, popularly known as the “Warren Buffett of Canada.” Watsa’s Hamblin Watsa Investment Counsel is the largest stockholder in the company and holds an 8.1% stake in the company.

Overall, BlackBerry remains a pale shadow of its past even as companies like Apple have raced ahead in the smartphone race. The company’s business debacle is now a case study on how the business failed to adapt to the changing dynamics.

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