Blackberry (TSX:BB) posted second quarter earnings this morning before the bell, and the results left many investors wanting. The company’s share price plummeted over 22% on release of the earnings and Blackberry seems like a shell of its former self during the smart phone boom in 2008 when the company reached highs of over $115 a share.
Blackberry hasn’t seen a day of trading this poor since 2017, and many prospective investors are now wondering if this company may be a buy at these prices. But first, lets go over how the company did in its fiscal 2020 second quarter. Keep in mind, Blackberry reports in US dollars, and as such the figures will be listed in the currency below.
Blackberry misses on both top and bottom lines
Blackberry reported revenue of $244 million, which fell well short of the benchmark of $268 million analysts put on the company. It posted a diluted loss per share of $0.10 on the quarter, which was considerably more than the $0.04 it lost in its second quarter one year ago. Considering estimates were in the range of a $0.05 loss, this is a fairly substantial miss on earnings as well.
Operating expenses are up 24.1% year to date compared to last year, coming in at $432 million. The company has spent nearly 25% more capital on marketing, selling and administration expenses. And although revenue is up 16% year over year, the expenditures are currently not paying off.
One of the lone bright spots may very well be that the company paid off a little more than 5% of its long term debt during the second quarter, but overall it was a fairly poor outing from Blackberry, and as such its share price took a nose dive.
Should you be looking at the stock moving forward?
I’ve personally never been a fan of Blackberry. There is much better communication development companies out there to invest your money in. However, we are in the situation where yet again the market has overreacted to a poor quarter. We’ve seen this from other popular Canadian stocks like Canada Goose (TSX:GOOS) which fell over 30% in a single day of trading due to revised guidances.
The company is investing heavily in its business, which in turn has hurt its earnings over the short term. However, the company is still posting 16% quarterly revenue growth and posted positive free cash flows of $14 million on the quarter.
The stock has hit oversold levels with a 14 day RSI of 26, and is trading at lows it has not seen in four years. Blackberry has had a fairly strong track record of beating earnings, as it did so in every quarter of 2018, so investors who are willing to look past the earnings miss and instead look at the strong revenue growth and investments made to grow the company may want to take a chance.