BlackBerry (BB) likely to report weak Q4 earnings on March 31

BlackBerry Limited (NYSE: BB) is slated to report its fourth-quarter 2020 earnings results on Tuesday, March 31, after the market closes. The top line will be benefited by BlackBerry Cylance and licensing while the results will be impacted by the crash of the auto industry due to turbulent market conditions and the likelihood of a severe recession.

The bottom line will be hurt by an increase in costs and expenses. This includes the acquired intangibles amortization expense, stock compensation expense, restructuring charges and the fair value adjustment on the debentures. The company is expected to report a loss in the bottom line due to the costs associated with the integration of Cylance.

Investors remained positive about the company’s Internet of Things segment and its cybersecurity business, Cylance. However, certain concerns continue to trouble BlackBerry. This includes weak cybersecurity business, recession anticipated auto industry, and a decline in the shareholding of ex-Cylance shareholders.

The market experts believe that the company is likely to incur an even worse performance for the first quarter of 2021 due to the spread of the Covid-19. BlackBerry has been trying hard to grow its software and service portfolio but the investments are likely to turn thinner due to a refinance of major debt.

Analysts expect the company’s earnings to drop by 63.60% to $0.04 per share while revenue will jump by 15.30% to $296.3 million for the fourth quarter. The company has surprised investors by beating analysts’ expectations thrice in the past four quarters. The majority of the analysts recommended a “hold” rating with an average price target of $6.75.

For the third quarter, BlackBerry slipped to a loss from a profit last year due to higher costs and expenses despite an 18% increase in the top-line. IoT revenues dipped slightly while licensing revenues saw a double-digit increase. On a geographic basis, revenues increased in the North America and EMEA regions while remaining flat in Other regions.

For fiscal 2020, the company will continue to invest in its product and go-to-market that includes delivering BlackBerry Spark, integrate BlackBerry Cylance portfolio, broaden reach in regulated verticals, and expand into new verticals. For fiscal 2020, the company expects adjusted revenue growth of 23-25% and a double-digit percentage increase in billings.

The stock ended down 3.56% at $3.79 on Friday. The shares are overvalued at the current levels with a bullish pattern trend. The performance outlook is positive in the near-term but is negative in the long-term. The stock is trading below the 50-day moving average of $4.82 and the 200-day moving average of $5.65.