BlackBerry‘s (NYSE:BB) stock started the year at $6.58 per share, but it hit a nine-year high of $25.10 on Jan. 27. The stock subsequently retreated to the mid-teens, but still remains up nearly 140% for the year. Let’s see why this battered tech stock suddenly attracted so much interest, and where it could be headed from here.
These developments lit a fire under BlackBerry’s stock
BlackBerry’s rally started in early December after the company announced a partnership with Amazon(NASDAQ:AMZN) Web Services (AWS) to co-develop IVY, a new cloud-based automotive platform based on its embedded operating system QNX.
BlackBerry’s stock jumped again in mid-January after it sold some of its older patents to Huawei and settled its patent infringement lawsuit against Facebook (NASDAQ:FB). BlackBerry initially sued Facebook and Snap back in 2018, claiming their apps infringed upon its mobile messaging patents.
Image source: Getty Images.
On Jan. 25, BlackBerry announced another automotive deal with Chinese tech giant Baidu(NASDAQ:BIDU), which will integrate QNX into Baidu’s maps in forthcoming electric vehicles from GAC Group.
BlackBerry didn’t reveal how much money it received from any of those deals, but they clearly got the market’s attention. The Reddit-fueled short squeezes, which recently lifted GameStop and other shorted stocks to all-time highs, then brought even more speculators to BlackBerry, Nokia, and other unloved stocks — even though only 7% of BlackBerry’s shares were being shorted at the beginning of the year.
Where does BlackBerry go from here?
BlackBerry’s stock might have rallied, but the company’s underlying fundamentals remain the same.
Under CEO John Chen, who took the helm in late 2013, BlackBerry phased out its hardware business, licensed its brand to third-party smartphone manufacturers, and expanded its software and services business. It also aggressively sued other companies to boost its patent licensing revenue.
BlackBerry’s revenue rose 15% in fiscal 2020, which ended last February, but most of that growth came from its acquisition of the cybersecurity firm Cylance and higher patent licensing revenue.
Image source: Getty Images.
In the first nine months of 2021, BlackBerry’s revenue declined 10% year over year to $683 million after it lapped those gains. Its QNX revenue also plunged as the pandemic disrupted the auto industry.
Its net loss widened from $111 million to $789 million during that period, mainly due to a hefty goodwill impairment charge. But its adjusted EBITDA — which excludes that charge, its stock-based compensation, and other expenses — rose 63% to $132 million.
That bottom-line growth was mainly supported by an increase in its high-margin licensing revenue. Analysts expect BlackBerry’s revenue to decline 14% for the full year, but for its adjusted EPS to rise 39%.
Next year, they expect its revenue to rise 9%, presumably as the auto sector recovers and its Spark suite of security services gains more customers. But its adjusted earnings are still expected to slide 17% as its licensing business faces tough year-over-year comparisons.
Based on those forecasts and the stock’s current price of around $15 a share, BlackBerry trades at nearly 100 times forward earnings and eight times next year’s sales. Those valuations might be reasonable for a high-growth cloud stock, but BlackBerry’s uneven growth doesn’t justify those premium valuations.
Beware of BlackBerry’s hype
BlackBerry has a habit of dressing up old deals like new ones, then obfuscating the actual financial benefits.
For example, BlackBerry’s AWS announcement last December was merely an update of a project that had been revealed nearly a year earlier. In the fine print of its latest SEC filing, BlackBerry says IVY-powered vehicles won’t actually start shipping or generating any meaningful revenue until fiscal 2023. Its work with Baidu is also merely an extension of a previous driverless partnership.
BlackBerry didn’t reveal its exact financial expectations for either deal, and the only visible benefit is the installation of QNX in new vehicles — which isn’t game-changing, since it’s already the dominant OS in new cars.
It’s also odd that BlackBerry didn’t reveal any details about its long-awaited settlement with Facebook. That lack of clarity is frustrating, since BlackBerry generated nearly a third of its revenue from its “licensing and other” segment in the first nine months of 2020, and it needs the business to keep growing to boost its margins and earnings.
Based on those facts, I suspect that none of BlackBerry’s big announcements since December will meaningfully boost its revenue in fiscal 2021 or 2022.
It’s time to take profits
At this point, BlackBerry’s investors shouldn’t look a gift horse in the mouth. A combination of hype and a market-wide short squeeze boosted this stock’s price to double-digit levels again, but these gains are unsustainable.
BlackBerry isn’t doomed yet, but its core business still faces significant challenges from other cybersecurity companies, and its licensing business will eventually run out of companies to sue and patents to sell. Therefore, investors should take profits in BlackBerry now instead of waiting for lightning to strike twice.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
