BlackBerry (BB), once a star in the mobile devices market, got literally crushed by competitors like Apple and Samsung. Interestingly, nobody is talking about BlackBerry any longer. Most investors believe that BlackBerry disappeared or went bankrupt. Nothing is further from the truth: BlackBerry is a hidden gem right now, and it is a matter of time until it will start shining again, is the forecast of InvestingHaven’s research team. This article explains why BlackBerry’s outlook is bullish for 2018 and 2019, based on InvestingHaven’s forecasting principles.
BlackBerry’s outlook for 2018 and 2019: Start with the chart
InvestingHaven‘s research team has a unique methodology which is based on the principle “start with the chart”. In other words, a chart pattern is the primary indicator, and financials and fundamentals of a stock are only analyzed after reading the chart.
BlackBerry’s stock chart shows a gorgeous pattern: a potentially rounding bottom in a massive consolidation that has a time span of +6 years. What does this chart pattern mean? Very simple, BlackBerry’s stock price did find a long term bottom, and if the company is doing the right thing in creating value it will be confirmed by financial and fundamental data points in which case we can conclude with a bullish forecast.
That’s the sequence of our method: start by reading the chart, and only if it falls in one of the constructive patterns you should investigate financials and, as a last step, fundamentals.
Strictly speaking, BlackBerry’s outlook will be very bullish for 2018 and beyond once it rises above $16.5, and remains there for at least 4 consecutive weeks. If this were to happen the next potential target could be $36 or even higher.
On the flipside its price should not break below the rounding bottom. Once below $5.50 the outlook for this stock will be really bearish.
There really is no need to analyze each and every figure on a company’s balance sheet. The trends of top line figures is what matters. What do we see in BlackBerry’s financial overview (incl the latest quarterly financial report):
- Revenue stopped falling recently from $7.7B in 2014 to $1.12B last year. Quarterly revenue went from $293 in Q4 FY18 to $283M in Q3 FY18.
- Surprisingly, BlackBerry has very decent earnings, and a great profit margin. That may sound counterintuitive, but the facts are out there.
- BlackBerry has lots of cash, so there is no financial or cash flow problem at all: cash position was $2.5B at the end of FY2018 (Feb 2018).
- The company has a steady number of shares oustanding in the last 4 years.
- Short float ratio of 8.41% which is slightly at the higher side but not concerning at all.
- Debt got strongly reduced: $605M at the end of FY2018.
These are healthy financial top line figures.
So given the chart setup combined with financials the million dollar question is what the fundamental outlook is for this company. Stated differently, a solid and, preferably, accelerated growth rate will send the stock price of BlackBerry many multiples higher.
BlackBerry’s fundamentals suggest a bullish outlook starting 2018
From the shareholder Q&A during their latest financial results meeting (source):
BlackBerry expects its total software and services billings to grow in double-digits in fiscal 2019. The bottom line (on an adjusted basis) and free cash flow are also projected to improve in the same period.
BlackBerry’s new strategy is based on the “Enterprise of things” trend: connecting things in the enterprise world, interpreting the data and making them actionable, securing the data connections, and reporting on it, is what BlackBerry is doing nowadays. They totally refocused their business to a software company.
Revenue from software is growing very quickly; from 24% in FY16 to 81% in FY18. And the outlook of BlackBerry reflects this as seen in the investor presentation, see slides 23 + 24.
But there is more, BlackBerry is also innovating. They closed a partnership with Baidu recently on self driving cars software technologies.
BlackBerry’s QNX software, which are expected to start generating revenue in 2019. Investors and analysts are closely watching what comes of those agreements amid expectations that QNX could become a key technology in the burgeoning self-driving vehicle industry, serving as the operating system for computer chips used to run self-driving vehicles.
Note that BlackBerry is changing its accounting method in the coming months. That may impact their figures. Once that process is complete we believe this stock will start seeing the results of their (successful) business transformation.
It reminds us of Adobe Technologies which we tipped 18 months ago in 2 Cloud Stocks To Buy. That was when Adobe’s transformation to the cloud was complete, and ready to start the amazing growth. Since then, Adobe trades 250% higher. We expect a similar move in the coming 3 years with BlackBerry.
For investors willing to invest in Blackberry it is imperative to consult your financial advisor as this is only an educational research information at best.