blackberry stock

BlackBerry (NYSE: BB) stock is trading lower in US premarket price action today after posting mixed earnings for its fiscal second quarter of 2023. While its revenues and profits were ahead of estimates, it reported a fall in cybersecurity revenues which spooked investors.

The company also sounded cautious about the business outlook amid macroeconomic uncertainty. The global macro environment has deteriorated over the last month and many economists fear a global recession amid central bank interest rate hikes.

BlackBerry reported revenues of $168 million in the quarter which was 4% lower than the corresponding quarter last year. However, the metric was slightly ahead of the $166.7 million that analysts were expecting. The company posted an adjusted loss per share of 5 cents which was lower than the 7 cents per share loss that analysts were expecting.

BlackBerry’s Cybersecurity business reported revenues of $111 million in the quarter, a YoY fall of 7.5%. The business reported a gross profit margin of 55% in the quarter and has an ARR (annual recurring revenue) of $321 million.

The fall in revenues comes amid macroeconomic headwinds as well as rising competition. The business has been facing tough competition from the likes of Microsoft and IBM.

BlackBerry Stock Falls After Mixed Earnings

BlackBerry’s IoT (Internet of Things) business reported revenues of $51 million which were 28% higher as compared to the corresponding quarter last year.

Commenting on the performance of the business, John Chen, BlackBerry’s CEO said, “Our IoT business continues to gain market share, and design-phase revenue remained at near-record levels. A major design win in the quarter was with Volkswagen, who chose QNX for their new VW.OS, to be deployed across all Volkswagen group brands.”

During the earnings call, BB said that QNX is the market leader in its segment. Notably, BlackBerry has transformed its business to focus on emerging businesses like cybersecurity and autonomous driving.

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.

Digital World Acquisition Corp. (NYSE: DWAC), is among the meme stocks that have witnessed wild price swings. DWAC stock has plunged this year. Most recently, the stock nosedived when it said that it has lost $138.5 million in financing from PIPE (private investment in public equity) investors

BB Maintained Its Fiscal Year Guidance

BlackBerry maintained its fiscal year 2023 guidance and expects the IoT business to generate revenues between $200-$210 million. It said, “Normally, given the strength of the QNX business, we will adjust our revenue outlook upwards. However, given the macro headwind, we’ve been prudent in holding our outlook as is.”

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.

For the cybersecurity business, BB expects fiscal third-quarter revenues to be flat on a YoY basis. While the IoT business continues to grow fast, the company’s cybersecurity business has sagged.

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 but risks falling into the penny stock category looking at the pre-market price action.

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