By:
Alex Penkwitz, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary:
• BlackBerry Limited (NYSE: BB) engages in the provision of
enterprise software and services, which focuses on securing and managing
Internet of Things endpoints. BlackBerry Limited was founded in 1984 and is
headquartered in Waterloo, Canada.
• BB reported strong Q4
FY19 numbers. EPS and operating margins were two metrics that were extremely
impressive for the company in the quarter.
• BB finally completed
their acquisition of Cylance, a next-generation endpoint security technology.
• BB received notable
orders in both their Financial Services and Government verticals, driving
revenue growth for the quarter.
Key
points:
BlackBerry posted EPS of $0.24, nearly doubling their
EPS from last year and exceeding expectations. The notable increase in EPS can
be attributed to record high total software and services revenue. Their strong
revenue growth displays that there is an increasing demand for their services, reassuring
the positive directional movement in their business plan.
BB recently completed their
acquisition of Cylance. This suggests that BB is “beefing up” their security
business segment. The artificial intelligence and machine learning capabilities
that Cylance brings to BB are synergistic. This will allow BB to move closer
towards their long term vision for BlackBerry Spark becoming a secure
communication platform for the internet of things.
Two business segments
that drove growth for BB were Financial Services and Government. BB received
over 400 orders from the Financial Services vertical alone, including customers
such as Barclays Plc and Bank of Oman. In the Government vertical, the company secured
orders from several notable customers such as U.S. Air Force, U.S. Army, and U.S.
Navy. In addition, BB was chosen by NATO for the company’s secure voice solution.
What
has the stock done lately?
Technology stocks got hit
hard in Q4 2018 and BB’s price has seen these fluctuations. From late September
to the end of December, BB saw a 35% price decrease, starting at $14.62 on
September 28th and ending at $9.39 on December 31st. This
is followed by an immediate bounce back of 23% up to February 15th to
start Q1 of 2019.
Past
Year Performance:
BB has decreased 9% in value over the past
year. As I mentioned in the above section, the stock saw extreme declines
during the month of October in 2018. The overall increase in value is due to
the bounce back that the stock has seen in YTD 2019, as seen in the charts
below.
Source:
FactSet
My
Takeaway:
When this stock was first
pitched, its price was at $7.98 and the price target set on the stock was
$11.76. That price target seems very achievable in the long run with the time
horizon of the fund holdings being 2-5 years long. I expect to see BB continue to
rise after the sharp decline in Q4 of 2018 to surpass this price target by the
end of FY 2019.
Sources:
Factset
BlackBerry
Limited (2018). Q4 2018 10-K. Retrieved from Factset online database.
BlackBerry
Limited (2018). Q4 Earnings Call Transcript. Retrieved from FactSet online
database.
