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BlackBerry (BB) shares have rebounding nicely so far this year, rising 18% year date, compared to a 3% rise in the S&P 500 index. After falling roughly 50% over the past year, the cybersecurity specialist is looking at ways to revive revenue growth and regain investor confidence.
The Canadian software company is set to report fourth quarter fiscal 2023 earnings results Thursday after the closing bell. Reviving revenue growth and regaining investor confidence is something the company has attempted to do over the past decade. In the most-recent quarter, the company’s security segment, which makes up more than 60% of revenue, reported a $22 million year-over-year decline in revenues, which fell near 20%.
Investors want to see revenue revived in the security segment before betting on the sustained rise in the shares. Meanwhile, analysts aren’t holding their breath, and have pushed out their timeline for the once-prominent tech company to return to overall revenue growth into 2024. Analysts have been busy slashing their projections ahead of Thursday’s release. Notably, this would be the ninth consecutive quarter with declining revenue.
BlackBerry management, meanwhile, aims to hit revenue of $1.2 billion in fiscal 2027, believing it has an enormous opportunity to service customers in need of device security as the number of connected devices continue to grow. But that’s a tall order. Aside from the execution challenges, investors have also become seemingly frustrated with the management’s inability to generate much-needed cash from a patent portfolio sale. On Thursday the market will want to see whether its fundamentals can justify a higher price.
For the quarter that ended February, analysts expect BlackBerry to lose 7 cents per share on revenue of $156.65 million. This compares to the year-ago quarter when earnings were a penny per share on revenue of $185 million. For the full year, the loss is expected to be 22 cents per share, wider than the 1 cent loss a year ago, while full-year revenue of $664.34 million would decline 7.5% year over year.
The company is approaching its tenth year under CEO John Chen’s leadership, and the market is still waiting for quarterly and annual revenues to show improvement. In the meantime, the shares have suffered massively. And there likely won’t be any surprises on Thursday. BlackBerry pre-announced its Q4 results, releasing numbers that miss its previous guidance. Meanwhile, the company’s balance sheet has some investors uncomfortable.
Currently, the cash burn rate is about $100 million per year, which means, if remains at the current rate, the company could run out of cash in roughly three years. And this underscores the urgency for the company to immediately start generating meaningful revenue growth. Meanwhile, constant underperformance has raised doubts that the company has the right leadership to improve its growth prospects. In the third quarter, the company did beat on both the top and bottom lines, posting an adjusted loss of 5 cents on revenue of $169 million.
Both narrowly beat consensus for a loss of 7 cents on $166.8 million in revenue. But on a year-over-year basis, both measures were down from a breakeven quarter on revenue of $184 million. The management blamed the declines on economic uncertainty and its sales cycles, which it says are taking longer to complete as customer postpone or stretch out their order timelines. The company lowered it outlook for its cybersecurity business for flat revenue growth in first half of 2023, before showing growth in the second half of the year.
On Thursday the company must show meaningful improvements in revenue and profits to convince the market a sustainable path to growth still exists and that its stock is worth the wait.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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