BlackBerry Earnings: We Maintain Our Valuation After Good Results and Weaker Guidance

We maintain our $4.90 fair value estimate for shares of no-moat BlackBerry after the firm reported fiscal third-quarter results. Results were positive, but guidance for the fiscal fourth quarter missed our expectations. Still, we attribute most of the guidance miss to lumpy deals getting pushed out in the short term. Newly appointed CEO John Giamatteo reiterated the upcoming split of its Internet of Things, or IoT, and cybersecurity divisions, along with that cost-cutting measures taken during the quarter will continue the firm’s march to consistent profitability and positive cash flow. Overall, we maintain our view that BlackBerry’s IoT segment is attractive and poised well for the long term, but we hold concerns over the turnaround for the cyber business. We see shares as slightly undervalued but would point investors to moatier and more undervalued software names within our coverage.