Why This BlackBerry Stock Analyst Sees 'Show Me' Story Ahead Of Q1 Earnings

BlackBerry Limited BB is scheduled to release its first-quarter results Thursday after the market close.

The quarterly results are unlikely to be a needle-mover, given the significant rally in the stock, according to a RBC Capital Markets analyst. 

The BlackBerry Analyst: Paul Treiber maintains an Underperform rating and $7.50 price target for BlackBerry shares.

The BlackBerry Takeaways: The significant rally in BlackBerry shares reflects trading dynamics as opposed to materially improved fundamentals,  Treiber said in a note.

The company's core software business will remain soft, the analyst said. 

RBC's Expectations For BlackBerry's Q1 Print: First-quarter revenues are likely to have declined 18% year-over-year to $176 million, dragged by lower IP licensing revenues due to the pending sale of the company's patent portfolio, Treiber said.

The analyst expects an adjusted EBITDA loss of $5 million and an adjusted loss of 4 cents.

Enterprise Software & Services revenues are expected to decline 7% to $77 million, and Cylance revenues may have dipped 5% to $48 million, the analyst said.

The decline, according to the analyst, reflects customer churn.

Related Link: Why BlackBerry Stock Looks Revved Up For Q1 Earnings

BlackBerry Technology Solutions revenues are likely to have improved by 64% to $36 million, although remaining well below the pre-COVID-19 levels of $50 million to $60 million, Treiber said. The segment's revenues will likely to return to pre-COVID-19 levels by the third quarter, although auto supply constraints may push out the timing of rebound, he added.

BlackBerry is in negotiations to sell its patent portfolio, and the sale will help finance new software investments, the analyst said. BlackBerry's patents, according to the analyst, are worth $1 billion in a sale scenario, and this value is already priced into the shares.

"We believe normalization of investor sentiment on BlackBerry is a potential risk to the shares," he said. 

The investor debate on BlackBerry stems from the company's future opportunity compared to its current momentum, the firm said.

The company, therefore, remains a "show me" story, Treiber said. 

BB Price Action: BlackBerry shares were down 0.78% at $12.80 at the close Monday. 

Related Link: If You Invested $1,000 In BlackBerry Stock One Year Ago, Here's How Much You'd Have Now