BlackBerry Ltd Q3 Earnings: Software Growth To Continue

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BlackBerry Ltd (NYSE:BB) is slated to release its next earnings report on Wednesday before opening bell. Consensus for the BlackBerry Q3 F2018 earnings release stands at breakeven on about $217 million in revenue.

BlackBerry Q3 F2018 earnings: what to expect

In a note on Monday, Macquarie analyst Gus Papageorgiou said he expects the BlackBerry Q3 F2018 earnings report to reveal a breakeven quarter with $220.1 million in revenue. He slashed his estimate for software access fee revenues to bring it in line with management’s guidance, which results in negative impacts of $13 million in revenue for fiscal 2018 and 2 cents per share in earnings.

He doesn’t expect a “break-out quarter,” but he does look for software revenue to grow 20% on a year-over-year basis as total revenues shrink 27% as the transition phase toward primarily software continues. He also expects gross profits to continue to be strong at around 74%. That’s a slight decline from the second quarter, which received a significant boost from intellectual property licensing. He also expects the company’s balance sheet to remain strong.

Looking forward to Q4

The Macquarie analyst does look for the IP-related Nokia charge—amounting to $137 million on a GAAP basis—to be recorded in the BlackBerry Q3 F2018 earnings report, although he doesn’t believe the cash payment will be made until the fourth quarter. The Canadian firm lost a dispute with Nokia over a $137 million contract, but even after the payment is made, he projects the firm’s cash balance to remain around $1.7 million.

For the fourth quarter, Papageorgiou is currently projecting a breakeven result on $223.6 million in revenue. He explained that although overall revenue will likely decline by about 25%, software revenue should climb 24% in the fourth quarter. He also expects to start seeing contributions from RADAR during the fourth quarter as Enterprise software revenues start growing.

QNX and RADAR updates expected with BlackBerry Q3 F2018 earnings

Papageorgiou predicts that fiscal 2019 will be the year BlackBerry’s QNX and RADAR products start showing their “potential,” although he doesn’t expect any “material contribution” from RADAR in the third quarter. He does expect updates on both QNX and RADAR along with the BlackBerry Q3 F2018 earnings report, however.

He said RADAR should start showing momentum soon because of the added sales team. Since the Consumer Electronics Show is coming up in January, he believes this is the perfect time for BlackBerry to show off its technology and reveal the new contracts it has won recently.

The Macquarie analyst’s price targets for BlackBerry stock stand at US$13.20 and C$16.40 per share; he has an Outperform rating on the stock. Before the bell on Tuesday, the stock rose by as much as 1.28% to $11.08 per share.

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