BlackBerry Earnings Preview

If BlackBerry BBRY hasn’t made enough news over the past couple of trading days, it’s about to make more. Before the opening bell Thursday, the company will announce Q4 earnings. Here’s what you need to know before the announcement.

Expectations

BlackBerry is expected to report to investors what it is we are all supposed to call it. Analyst consensus is BlackBerry but the company could surprise with Research in Motion until the name is legally changed. But, seriously, street consensus has EPS at -$0.39 with revenue estimates at $2.84 billion.

That’s down 38 and 32 percent respectively year over year. If Research in Motion/BlackBerry sees a bounce from Thursday’s earnings, it’s proof that the actual number isn’t as important as the degree to which it beats the expectation.

Analyst and Commentary

Daniel Ernst of Hudson Square Research, in his report titled, BlackBerry…Could Get Better before Getting Worse, said, “We expect BlackBerry to report a mixed 4Q13…and believe margins and subscriber trends could both surprise in either direction.”

Stern Agee said, ”We anticipate the company to meet or beat consensus given BB10 momentum and a low bar where expectations are for sizable year over year declines in both revenue and EPS. However, we remain on the sidelines…”

It’s All About the Phone

BlackBerry was widely seen as the JC Penny JCP of the cellphone space but when it launched its BB10 operating system, there was excitement in the air giving the stock more reason to move higher. Up over 115 percent in the past six months, investors breathed new life into the stock banking on the fact that the phone didn’t have to dethrone Google GOOG or Apple AAPL. A strong third might be enough.

Analysts have their doubts. Stern Agee said, “So far, the feedback we have gotten indicates buyers are longtime loyalists as opposed to new customers. It remains to be seen if BB10 can gain mainstream acceptance against Android and iOS.”

A Morgan Stanley research note said, “We continue to believe BBRY is unlikely to emerge as a strong third OS and that BB10 primarily sells into existing BB7 users, not Android, or iOS converts.”

Or is it about the Phone?

Jefferies doesn’t think it’s as much about the phone as people think. In a research note, Peter Misek said that the street is missing the opportunities in BlackBerry’s mobile device management system. In corporate environments where employees can use their own mobile devices, security and integration is a concern. The BlackBerry Enterprise Service 10 is the company’s answer to corporate device management.

Misek said, “We believe AT&T T will heavily support BES10 with it possibly becoming AT&T's preferred MDM partner across all channels. We think BBRY's MDM software will gain traction throughout this year and see a significant ramp in revenues next year.”

Technical Analysis

Everybody knows that the fundamentals are about as impressive as New Mexico was in the NCAA tournament last week but BlackBerry does have at least one major positive going for it: its chart.

While volatile, the stock has participated in the market rally (unlike Apple). It has held its 50 DMA through all of its volatility and formed higher highs and higher lows. With Monday’s sell off, technical damage was done as it finally fell below its 50 DMA but one day doesn’t make a trend. It also finished one cent above its 20 DMA at $14.23.

If it can hold that level, technicians would consider that a bullish sign. If it breaks below that level, the next stop is significantly lower at $12.58.

BlackBerry has proven that it’s a stock where anything can happen. The risk/reward going into earnings would suggest staying on the sidelines.