Reject Panic and Buy Blackberry Ltd ($BB) with Confidence – Strong Software and Licensing Growth


BlackBerry Ltd (NYSE: BB) is having a rough year in terms of stock performance, but we believe most of it is due to the unreasonable panic in the Wall Street about the company that was once a symbol of growth and stability.

In June, Blackberry posted better-than-expected first quarter results. The company earned $0.03 per share, while the Street was expecting the company to show no profit in the quarter. Revenue of $213 million also crushed analysts’ forecasts of $208 million. Gross margin came in at 76%, which is slightly below the record level of 79% achieved the previous quarter.

Despite of the strong results, Blackberry stock plunged, mainly due to the software & service annual growth guidance of 8% – 10%, less than last year’s growth. But the guidance came low mainly due to the implementation of ASC 606 accounting rules.

BlackBerry Ltd (NYSE: BB) has consistently posted strong quarterly results over the last 8 quarters.

Blackberry has solidified its recurring revenue base. As of the end of the first quarter, the company has $277 million in deferred revenue, more than $195 million in deferred revenue in the prior-year period.

BlackBerry Ltd (NYSE: BB) revenues from licensing, IP and other were $63 million in the quarter, significantly more than $32 million in the year-earlier quarter.

Blackberry’s transition towards software business remains strong. BlackBerry’s global president of Enterprise Sales, Carl Wiese, recently said that over 80% of the company’s revenue now comes from software. This is a major achievement for the company

In the last quarter, BlackBerry Ltd (NYSE: BB) announced that it will license the QNX software which is used in self-driving cars. Self-driving cars constitute one of the biggest growth markets in the world, as car makers across the world ditch conventional engines. According to an estimate, Blackberry’s QNX software is currently operating in over 120 million cars.

Blackberry also recently struck a deal with Bullitt Group, a British smartphone maker that manufactures phones big brands like Caterpillar and Land Rover. Bullitt will start using Blackberry Secure in its products. The company has a presence in over 100 countries. This partnership will boost Blackberry revenue in the future.

Earlier this year, BlackBerry Ltd (NYSE: BB)’s stock surged after the company struck a deal with Chinese tech giant Baidu for self-driving cars technology. Blackberry also has deals with Qualcomm and Aptiv. Blackberry also has a partnership with Chinese company TCL. TCL recently launched BlackBerry KEY2 in China. The smartphone was received well in the country. BlackBerry Ltd (NYSE: BB) partner in India, Optiemus, will also launch new Blackberry phones in a few months. These partnerships will keep Blackberry’s smartphone business alive and well.

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Author does not have investment in stock discussed in this article.

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