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BlackBerry Surprises With a Beat, What's Next?

Picture of BlackBerry 10 Sign

 

Shares of BlackBerry (BBRY) are trading up as much as 5%  this morning after the company reported a surprise fiscal fourth-quarter earnings beat. The company earned $0.22 per share on revenue of $2.7 billion – topping Street estimates of $0.29 loss.

 

The company said that roughly 61% of its revenue came from hardware, while services accounted for 36%. The surprise profit was because the company was able to improve its margins, which arrived at 40%. Margin is important because it tracks how much money BlackBerry makes on each device it sells. What would be the point of great sales numbers if it doesn't bring in the profits?

 

There are still uncertainties, however. One example is that the company also lost plenty of subscribers. Aside from selling nice phones, BlackBerry's strong subscription service was what shot the company up to the top of the tech world. The company said it ended the fourth-quarter with 76 million subscribers, which is 3 million less than it had in the third-quarter.

 

Thorsten Heins, BlackBerry's CEO, who has done more than a decent job since taking over the company, said:

 

"We have implemented numerous changes at BlackBerry over the past year and those changes have resulted in the Company returning to profitability in the fourth quarter. With the launch of BlackBerry 10, we have introduced the newest and what we believe to be the most innovative mobile computing platform in the market today. Customers love the device and the user experience, and our teams and partners are now focused on getting those devices into the hands of BlackBerry consumer and enterprise customers."

 

That's all well and good. But this is a taller task than the company realized. Apple (AAPL) and Samsung are not going to allow that to happen. Now it's beginning to look more and more like the “feel-good” turnaround story that investors were hoping to see is evaporating right in front of their eye.

 

While I'm willing to give the company the credit it deserves for its recent rebound, BlackBerry has been too far behind to fully complete the task. What's more, after what was considered a "dud" in the launch of the company's new Z10 phones, earnings needed to inspire confidence. But BlackBerry (again) fell short.

 

For now, investors have to ask themselves, how much higher the stock can go after having almost tripled the past six months. It might be time to take your gains and run.  The phone's dead on arrival.

 

Disclosure: At the time of publication, Richard held shares of Apple and no positions in the other companies mentioned.

 

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