Is BlackBerry a Pick After the Earnings Report?
Mark is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
BlackBerry (NASDAQ: BBRY), a company that is on its way to becoming an attractive investment once again, reported its results for the first quarter of 2013. In this article, I will examine the company’s financials to determine whether or not the stock will be an attractive investment.
BlackBerry reported a GAAP loss from continuing operations of $84 million, compared with a GAAP income of $94 million in the previous quarter. The loss was caused by the Venezuela foreign currency restrictions that impacted GAAP earnings and adjusted earnings by approximately $0.10 per share. The adjusted net loss from the continuing operation was $67 million. The adjusted loss excluded the impact of pre-tax charges of $26 million related to the Cost Optimization and Resource Efficiency program.
The company reported a revenue of $3.1 billion, up 15% from the previous quarter. Its North American revenue grew sequentially by 30%, while the Asia-Pacific revenues grew by 35%. The Europe-Middle East-Africa revenue grew by 9%. However, the Latin American revenue declined by 6% due to the Venezuela foreign currency restrictions. The restrictions negatively impacted the service revenues by $72 million. It also negatively impacted the gross margin by 2%.
Blackberry reported that it shipped 6.8 million BlackBerry 10 smartphones, compared with 1 million in the previous quarter. The total of cash, cash equivalents, and short term and long term investments was $3.1 billion, compared with $2.9 billion at the end of the previous quarter, an increase of around $200 million.
Excluding the Venezuela foreign exchange restrictions, BlackBerry would have approached a breakeven financial report. Besides, it recorded an improvement in revenue. All its areas of operations - except Latin America - showed growth.
BlackBerry also announced that it would continue to focus its efforts on promoting its emerging mobile computing platforms.
“Over the next three quarters, we will be increasing our investments to support the roll-out of the new products and services and to demonstrate that BlackBerry has established itself as a leading and vibrant player in next generation mobile computing solutions for both consumer and enterprise customers,” said Thorsten Heins, the CEO of Blackberry.
There are other highlights of the company’s next plans. It will invest resources in the global roll-out of the BlackBerry 10 and evolve BlackBerry Messenger as well as launch other revenue initiatives associated with new services and emerging computing opportunities.
Now that BlackBerry is planning a global launch of Blackberry 10, it is time to look at the activities of the competition.
Apple (NASDAQ: AAPL) is a leader in the smartphone sector. It has been busy expanding its reach by developing new products. In reaction to BlackBerry 10, it has developed iOS 7. The product ditched the convention of surrounding everything with dark or black bars and frames and housed a selection of key app shortcuts and other interface elements throughout the phone. The operating system could hurt BlackBerry because both are targeted at the same market.
Apple is now trading around $422 per share. From an investment standpoint, Apple offers investors solid EPS growth -- estimated to average 20.88% a year over the next half-decade. At a forward P/E of 9.69, shares of Apple are more profitable than Blackberry’s. As a matter of fact, Blackberry has no price to earnings figures.
Nokia (NYSE: NOK) is in the process of reinventing itself in the competitive smartphone sector. To rival BlackBerry, it has introduced the Nokia Lumia 925, a reinterpretation of its award-winning flagship, the Nokia 920. The phone showcases the latest camera innovation and third-party application. It could steal some of BlackBerry’s customers because it is targeted at the high-end sector of the smartphone market.
The stock is now trading around $4.13 per share, surpassing the yearly target of $3.34. At a price to sales ratio of 0.42, it is cheaper than BlackBerry (0.44).
Another rival of BlackBerry is Google (NASDAQ: GOOG). Its Android OS is the clear-cut leader in the smartphone mobile operating system race. The operating system has a broad selection of devices from various partners.
Unlike Apple and Nokia, Google is open to a partnership with BlackBerry. In fact, it announced that it would release a dedicated BlackBerry 10 app when its users increase.
Google trades around $905 per share. With a price to sales of 5.61, it is more expensive than BlackBerry. But with EPS of $33.42, it is far more profitable. At a forward P/E of 16.88, shares of Google are more expensive than Apple’s, but more profitable than BlackBerry’s.
BlackBerry is still in its early stages of a rebound. It trades around $10, about 45% below its 52-week high of $18.32. So some short-term profit can be made. The Blackberry 10 platform and the BlackBerry Enterprise Service 10 are proving to be profitable computing solutions. I expect BlackBerry to return to profitability and be an excellent investment for income hunters. Investors should watch the stock with the expectation of buying it for favorable returns in the next few years.
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Mark Girland has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!