What's so significant about $0.25 EPS? Is it too much to ask for when the consensus estimate is $0.05-$0.07?
Let's go back to Q4F2013...
CEO Thorsten Heins said "We have implemented numerous changes at BlackBerry over the past year and those changes have resulted in the Company returning to profitability in the fourth quarter. Including the anticipated 50% sequential increase in marketing spending, the Company believes it will approach breakeven financial results in the first quarter based on its lower cost base, more efficient supply chain, and improved hardware margins."
Regarding the outlook for this quarter, the company said, "including the anticipated 50% sequential increase in marketing spending, the Company believes it will approach break-even financial results in the first quarter based on its lower cost base, more efficient supply chain, and improved hardware margins."
What does that mean to you? To me at the time, I thought it meant to break-even for Q1F2014. What confused me more was that BlackBerry registered $0.19 EPS on 1 million Z10 sales in Q4F2013. So how could you not break-even in Q1 with an expected 3-4 million Z10+Q10 sales?
Perhaps Heins wasn't targeting an EPS break-even goal for Q1F2014, but rather for the company to break-even on the EPS TTM! Why $0.25 or maybe even $0.24? Let's look at the previous 3 quarters' EPS:
Q2F2013 = ($0.45)
Q3F2013 = $0.02
Q4F2013 = $0.19
In order for the EPS TTM to reach break-even we would need $0.24, to be profitable we need $0.25.
Why is a positive EPS TTM important? It could be important because there may still be a lot of money on the sidelines undecided about the next step. These monies belong to pension funds, mutual funds, 401(NYSE:K)s, and the retail public, and they may be governed by rules restricting them from investing in BlackBerry. With $0.25 EPS, BlackBerry will be officially profitable and out of the doghouse; hopefully by removing those restrictions, Blackberry could welcome new investors.
In the long-term, BlackBerry is setting up quite nicely. With growing earnings and future growth prospects (new product launches with 6 in total this year, BBM multi-platform crossover and monetization via BBM Money, BBM Channels, BES10.1.1 implementation, and BB10/QNX licensing e.g. the most recent being with Garmin and their K2 system wardsauto.com/politics/garmin-official-n...), there's no where for BlackBerry to go, but up.
Special thanks all my friends that I've had the honour of meeting while 'longing' BlackBerry. Not only are you guys a great team, but more importantly a great family. I also want to thank oneinfiniteloop for providing me the idea for writing this article. I am also greatly appreciative for the support and knowledge that I've received from the fine folks here at Seeking Alpha, from Stockhouse as well as Stocktwits. And thanks to BlackBerry support sites such as Crackberry.com, N4BB.com, blackberryos.com, rapidberry.net, nerdberry.net and many others. Thank you all. May we all be prosperous and successful in the future.
Disclosure: I am long BBRY.