Is BlackBerry A Pick After The Earnings Report?

BlackBerry (BBRY) has reported its results for the first quarter of the fiscal 2004. The company recorded a revenue of $3.1 billion, up 15% on a quarter-on-quarter basis. In this article, I will examine BlackBerry's first quarter financials to determine whether or not the stock is an attractive investment.

Financial

BlackBerry reported that its North America region revenues grew 30% on a quarter-on-quarter basis. The Asia-Pacific region revenue grew by 35%, and the Europe-Middle East-Africa regional revenue showed a growth of 9%. BlackBerry shipped 6.8 million smartphones, up 13% from the figure of the last quarter . The company sold about 100,000 BlackBerry Play Book tablets. The total of cash, cash equivalents, and short-term and long-term investments was $3.1 billion, compared with $2.9 billion at the end of the previous quarter. The company's hardware division contributed 71% of the total revenues, compared with 61% for the previous quarter.

However, BlackBerry was hurt by the Venezuela foreign currency restrictions. Consequently, the company's service revenues were 26% of the total, down from 36% in the last quarter. The gross margin was negatively impacted by 2%. The Venezuela problem also affected the company's earnings and the adjusted earnings, both down by approximately $0.10 per share. The GAAP loss from the continuing operations was $84 million, compared with a GAAP income of $94 million in the last quarter.

Valuation

Among the best news from the earnings report is that BlackBerry returned to a sequential growth in three of its four regions due to the BlackBerry 10 roll-out. The device accounted for 46% of all smartphone sales, an improvement from 16% in the last quarter. Another bit of good news is that the BlackBerry 10 Querty device had 320 carrier acceptances completed to date. The product is now available in 96 countries. The final bit of good news is that BlackBerry's cash flow from operations is the highest in the past three years.

BlackBerry's Initiative Toward Growth

BlackBerry is taking several steps to improve its margins in the next few months. The company will invest in the BlackBerry 10 smartphone launches and the roll-out of the BlackBerry Enterprise Service 10. It wants to direct its energies toward the building of the BlackBerry Messenger into a strong social messaging application. The company also wants to invest its resources into the new services and the emerging mobile computing opportunities.

BlackBerry needs to take these measures in order to compete in the highly competitive market. Fortunately, the sales of the BlackBerry 10 are encouraging. Additionally, a growth prospect exists for the BlackBerry 10 Querty device. These developments are crucial, as BlackBerry strives to gain advantage over its rivals.

When we take another look at the earnings report, we notice that BlackBerry recorded a net loss only because it was hurt by the Venezuela foreign currency restrictions. Additionally, the company grew its cash flow from operations. It is clear BlackBerry is well-positioned to invest in its products and grow the market share of their segments in the next few quarters.

With a price to sales ratio of 0.67, BlackBerry trades cheaply. This is impressive given that the company has a gross margin of 40.12%. The earnings report shows the company is headed toward advancing its operational efficiency and is capable of positioning itself toward a sustainable growth in the fiscal year 2015.

Competition

How is BlackBerry performing in a relation to its rivals? With a price to sales of 0.67, compared with 2.19 for Apple (AAPL), 5.44 for Google (GOOG), and 0.38 for Nokia (NOK), and a gross margin of 40.12%, compared with 37.50% for Apple, 57.45% for Google, and 33.09% for Nokia, BlackBerry does appear to be positioned for a future growth. Nokia, Apple, and Google have the competing products and are its direct rivals. However, BlackBerry's earnings report has shown that the company will remain competitive.

Conclusion

There is a risk in buying a BlackBerry share. The company is still in its launch circle and has yet to see all its BlackBerry 10 products contribute to its revenue. But looking at the earnings report, we can say the company is in a financially strong position. Based on its price multiples and its continuing lack of debt, we can say HOLD the BlackBerry share for the long term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.