BlackBerry (BB) Stock Soars on Results, Upgrade

BlackBerry (BB) stock is jumping 16% this morning after the company reported stronger-than-expected fiscal third-quarter results and TD Cowen upgraded the shares to Buy.

Also importantly, BlackBerry’s recently announced decision to sell its Cylance business has significantly improved its outlook.

BlackBerry reported Q3 revenue of $162 million, well above analysts’ average estimate of $143 million. Moreover, its earnings per share came in at 2 cents, versus analysts’ mean outlook of 0 cents. Also noteworthy is that it generated free cash flow of $3 million, well above the -$33 million of free cash flow that it had reported for the same period a year earlier.

Additionally, the company delivered Q3 adjusted EBITDA of $23 million, which was above the upper end of its guidance range. The EBITDA of its Cybersecurity unit was $8 million. Excluding the company’s Cylance IT security business,  the EBITDA of its cybersecurity unit would have been $22 million, BlackBerry reported. Earlier this week, BlackBerry announced that it had agreed to sell its Cylance unit to privately held Arctic Wolf.

In Q4, its current quarter BlackBerry expects to generate EBITDA of $10 million to $20 million. For all of its current fiscal year, the firm expects its adjusted EBITDA to come in at $60 million to $70 million, excluding Cylance.

Reacting to the company’s results and guidance, TD Cowen raised its rating on BB stock to Buy from Hold. The bank upgraded the shares partly due to what it sees as the firm’s  “low valuation and significantly improved cashflow expectations.” And although BlackBerry’s remaining cybersecurity assets look poised to undergo “continued..volatility,” the firm’s free cash flow generation is rebounding meaningfully, the bank stated.

While we acknowledge the potential of BB, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ ALSO 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: The author holds shares of BB stock and has no plans to trade it in the next 48 hours. This article is originally published at Insider Monkey.