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Is BlackBerry A Turnaround Play After Its Quarterly Results?

Blackberry reported better than expected earnings in its most recent quarterly results — is the company finally picking itself back up?

BlackBerry (NYSE: BB) was one of the few in the collective pool of short squeeze targets that drove the market to mania in February 2021. This saw a relatively impressive increase in the share price over a relatively short period of time, but for the most part, BlackBerry has barely moved in more than a decade. So how has the business changed?

What does BlackBerry do?

For many of us, we remember BlackBerry for the innovative mobiles the company created in the back half of the 2000s, which consequently, due to competitive innovations like Apple’s iPhone, drove a major rise and fall in the company’s value over that period. But the company has steered in another direction now.

Its primary markets as of 2021 are the internet of things (IoT) — in BlackBerry’s case, for digital cockpit and infotainment systems — as well as professional services and cybersecurity, which uses A.I. and machine learning to optimize protection against online threats and decrease operational costs for companies. 

BlackBerry’s Q3 2022 results

The company’s revenue decreased from the same period last year, from $218 million to $184 million. The company also saw decreasing margins which can be attributable to investments the company is making in research and development as part of its long-term strategy. Cybersecurity was the best performing category with $128 million in revenue, gross margins of 59%, and a 95% dollar-based net retention rate.

Its auto industry segment also saw solid progress through a multi-year agreement with premium automobile manufacturer BMW, and BlackBerry is making its QNX product for autonomous driving, digital cockpit, and infotainment systems available for a mix of models. Google and Qualcomm are among the high-profile clients BlackBerry is working closely with to develop new technologies for QNX to serve other sectors too, including robotics, medical devices technology, industrials, and fleet services.

BlackBerry’s outlook as a long term investment

Although the company is making headway in a number of growing segments, it still looks like it has a long way to go before it can be deemed a reliable investment. History tells us so, and although it’s not perfect, incremental growth over years or decades generally suggests strength in a business that is making the right decisions and innovating to retain relevance in changing environments. For BlackBerry, it’s taking the right steps but that case hasn’t come to fruition yet. But, as supply chain issues wane, we may see a more positive spectrum down the line.

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