In Line Results for Blackberry, Shares Fairly Valued
While we slightly lowered our revenue projection for this fiscal year, we continue to expect margin expansion during the same period.
BlackBerry (BB) reported fiscal 2019 first-quarter results with total revenue and earnings in line with our projection and slightly above consensus. However, the firm’s enterprise software revenue, which makes up more than 35% of total revenue, declined year over year mainly due to BlackBerry’s adoption of ASC 606. The firm’s new accounting standard also weighed on its full-year software and services revenue growth guidance, which was slightly below expectations. Blackberry did continue to increase its recurring revenue, which helped maintain strong 76% gross margin. While we slightly lowered our revenue projection for this fiscal year, we continue to expect margin expansion during the same period. We are maintaining our $10 fair value estimate per share for this no-moat and very high uncertainty name. While BlackBerry shares are down 9% in reaction to first-quarter results and guidance, we continue to recommend a wider margin of safety before investing in this name as it continues to trade in 3-star territory.
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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.