BlackBerry BB stock is plummeting on Friday after reporting strong second-quarter results on Thursday.
BlackBerry’s revenue was $145 million, beating analysts’ consensus estimates of $141.42 million. IoT sales increased 12% to $55 million. Cybersecurity revenue increased 10% to $87 million. Licensing revenue was $3 million.
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BlackBerry expects third-quarter sales to be between $146 million and $154 million, and full-year sales between $591 million and $616 million.
RBC Capital analyst Paul Treiber reiterated BlackBerry’s sector perform rating and $3 price target.
This rerating reflects BlackBerry’s slowing growth in cybersecurity and IoT and lack of prospects for growth in emerging segments.
Price targets value cybersecurity at 0.5x calendar 2025 EV/S and IoT at 6.3x calendar 2025e EV/S.
Treiber said IoT’s target valuation multiple is justified to be lower than Autotech’s peers given lower growth forecasts, while cybersecurity’s target valuation multiple is based on the sector’s historical struggles and declining profitability. He pointed out that considering this lack, it was justified to underperform its cybersecurity peers.
Treiber noted that BlackBerry’s significantly lower operating expenses improved its prospects for sustained profitability. However, the outlook for revenue growth is less clear given industry and competitive headwinds.
The analyst noted that near-term stabilization of BlackBerry’s business and profitability could help lift its valuation from its rock bottom. He said any significant rerating of the stock would likely depend on sustained profitability and growth, as well as other potential value-creating strategies, such as the sale or spin-out of the cybersecurity business.
Treiber expected third-quarter sales of $150.1 million.
Price Action: At last check on Friday, BB stock was down 0.98% at $2.52.
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