BlackBerry Earnings: Look Past the Artificially-Inflated Top Line, Core Performance Was Uninspiring

We maintain our $4.90 per share fair value estimate for BlackBerry after it reported disappointing core software sales in its first fiscal quarter. Both cybersecurity and Internet of Things sales missed our expectations. We continue to see the cybersecurity business as a weak performer in a tough market, which contributes to our no-moat rating. BlackBerry registered its recent patent sale as revenue in the quarter, which led to inorganic sales growth and upside to non-GAAP earnings. We do not see this one-time sale as indicative of stronger fundamentals, and reiterate our view that it is value-neutral in the long run. BlackBerry shares rose as much as 15% after the print, we think due to the inflated top line figure and BlackBerry’s large mix of retail investor interest. We see shares as overvalued and recommend investors seek out moatier names at more attractive valuations.