After Q2 Beat, Blackberry May Go Shopping

As BlackBerry Ltd BBRY continues its transition from hardware manufacturing to software and services, Canaccord Genuity expects an emerging emphasis on the internet of things, specifically through the firm’s Radar unit.

But success may be stunted by the competitive landscape, particularly with regard to clients in nonregulated industries. BlackBerry may be limited acting solo.

“We view potential acquisitions with its strong balance sheet as the most likely way BlackBerry can create shareholder value and augment revenue and earnings growth longer term,” analyst Michael Walkley said in a Friday note.

Walkley considers the firm well-situated to hire and acquire with its $1.9 billion in net cash. (See Walkley's track record here.) 

Growth Opportunities

At the same time, he anticipates steady growth in BlackBerry’s enterprise software and services, technology solutions and IP and device licensing units.

It may not have immediate material impact though. Licensing revenue is expected to drop sequentially this quarter, and enterprise software and services is not predicted to generate “meaningful” revenue until the second half of 2019, despite Walkley’s anticipation of an eventual 10-to-15-percent growth rate.

In the near term, expansion in the ADAS, Digital Cluster and Telematics segments should offset deceleration in infotainment, according to Canaccord's projections. 

Other catalysts included Radar’s expanding partnership with Titanium and new channel partnership with FleetComplete, as well as QNX’s new contract to support Delphi Automotive PLC DLPH’s autonomous driving technology.

Earnings Analysis

In spite of BlackBerry’s sizeable second-quarter earnings beat, Walkley maintained a Hold on the stock with a $10 price target. He did, however, raise his full-year estimates for earnings per share from $0.03 to $0.05 and revenue from $923.8 million to $932.6 million.

At the time of publication, BlackBerry was trading up 5.44 percent at a price of $11.04. 

Related Links:
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Software And Services Slump Plagues BlackBerry In Q1

Photo courtesy of BlackBerry.