Blackberry (TSX:BB)(NYSE:BB) stock has dropped 22% over the past month. The company released its second quarter fiscal 2020 results on September 24. This disappointing release rattled investors and sent Blackberry shares to the lowest level in over five years.
The news was not all bad. Blackberry did report total non-GAAP revenue of $261 million, which was up 22% from the prior year. Total non-GAAP software and services revenue rose 30% year-over-year to $256 million. Its key QNX, Cylance, and Licensing businesses all met or exceeded expectations in the quarter. However, Blackberry only managed to break even on an adjusted earnings per share basis.
Poor earnings forced Blackberry to narrow its full-year revenue growth guidance to between 23% and 25% from the original 23% to 27%. John Chen was typically optimistic, blaming the lacklustre earnings report on execution issues. However, he conceded that the landscape had become more competitive and that Microsoft had been “aggressive” as a competitor.
Blackberry stock sits in late September with a sky-high P/E ratio and a price-to-book of 1.1. This has been a frustrating stock to own. Positive news has teased the potential for a real break out, but Blackberry has been unable to provide the kind of growth investors are looking for in the small Canadian tech space. Shares last had an RSI of 22, putting Blackberry in technically oversold territory.
I still like the track Blackberry is on, but the first two quarters of fiscal 2020 have been disconcerting. This is a high-risk medium-reward play in the early fall.
