Don't Pick BlackBerry
Its slower cash burn is encouraging, but we remain concerned about end-market demand.
BlackBerry (BBRY) reported decent but not overwhelming fiscal 2015 first-quarter results that indicate its turnaround to cash flow break-even by the end of the fiscal year is underway. We're encouraged by BlackBerry's slower cash burn (excluding one-time cash windfalls), but in the long term, we remain much more concerned about end-market demand for the company's handsets and services. We didn't see much from this earnings report to lessen our concerns. We are likely to maintain our $7 fair value estimate and Morningstar Economic Moat Rating of none.
Quarterly revenue was $966 million, just below Street consensus and down 1% sequentially. The firm sold 1.6 million handsets in the quarter to retailers (1.0 million of which use its current BB10 operating system) and 2.6 million handsets to end customers. Although the May quarter is typically slow for smartphone demand, the firm's Z3 launch in Indonesia didn't appear to make much of a dent in BlackBerry's results. The majority of revenue (54%) again came from service revenue, mostly earned on service access fees on legacy BlackBerry 7 subscribers.
Brian Colello, CPA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.