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BlackBerry Is A Buy

|About:BlackBerry Ltd. (BBRY)

BlackBerry (NASDAQ:BBRY) delivered full year results and, for the first time, we are starting to see the impact of the decisions taken by the current management team.

The results were quite positive. While net income is still not reflecting the achievements of current management, the increase of gross margin in the last quarter indicates that the cost cutting measures are being effective and that the new products have a good profit margin. In comparison with the last quarter, gross margin increased from 30.4% to 40.1%, meaning that while revenue decreased from $2,727 million to $2,678 million, gross profit increased from $830 million to $1,075 million, a very good sign. As an example, if the company maintains last year revenue of $11,073 million and increases the gross margin from 31% to 40% gross margin, it will produce almost more $1,107 million in results, a very significant increase.

Also good was the fact that R&D expenses maintained stable and that the company still carries no goodwill on its balance sheet.

  For the year ended March 2013 For the year ended March 2012
-Revenue (in millions) $11,073 $18,423
-Gross margin (in millions) $3,434 $6,575
-Gross margin % 31% 35%
-Operating income (in millions) $(1,235) $1,497
-Net income (in millions) $(646) $1,164
-Cash and investments (in millions) $2,900 $2,900
-Long term debt (in millions) $0 $0
-Total equity $9,460 $10,100

While in terms of sales it's still to early to know the impact of the new BB10 smartphones, it's encouraging to see that the company maintained a healthy balance sheet during the last year, and while it was waiting for the new operating system to be introduced.

It will probably take a few more quarters to have the verdict regarding true acceptance from the consumers but, there is good potential for profitability even if revenue maintains the current levels and gross margin maintains the 40% level during the year. In this case, net income would be approximately $400 million, meaning that you would be paying currently slightly less that 20 times earnings. If things happen to go slightly better than expected, there should be a good upside potential and the true P/E ratio would be considerably lower.

So, with the current market cap at around $7,800 million, with no long term debt, $2,900 million in cash and investments, an efficient cost structure, an almost $2,000 million discount to book value, and the new BB10 smartphones finally here, I believe this is a great investment opportunity.

The numbers are very attractive and, if you can, go out and try the BlackBerry Z10. If you find that you like it, you cannot miss this investment opportunity.

Disclosure: I am long BBRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Stocks: BBRY