Research In Motion Ltd (BBRY): Earnings Were Dim, But the Story’s Not Over

The graphic above could show the beginning of BlackBerry’s recovery. But this process will definitely take more than a handful of months to happen. The revenue figures that BlackBerry showed last Friday confirm what traffic data showed: Revenue is increasing. It came in at $3.1 billion but it still represents a 15% increase from the previous quarter. If you assume that BlackBerry will continue increasing its revenue at the same growth rate for the next three quarters, the company will have no problem in doing $14 billion in sales this year.

This suggests that after Friday, the stock has become much more attractive. Under a one-year investment horizon, the chances are high that Blackberry will see a price increase. But let’s be clear: Even though the market may have overreacted this Friday, nobody should expect a correction in the next days. In the short run, BlackBerry will show extremely high volatility, because nobody knows what to make out of the poor forecast the company announced this Friday. The upside is that expectations now are much lower for the next quarter.

The bottom line

Research In Motion Ltd (NASDAQ:BBRY)’s crucial mistake was underestimating the smartphone market six years ago. As a result, its share price has steadily declined in the past five years, as Apple and Samsung (early movers) have surpassed it in the smartphone market. The BlackBerry 10 symbolizes the most aggressive move of BlackBerry in order to recover market share and try to fix an old mistake.

For many, this seems just a desperate (perhaps final) move, as the smartphone industry is fiercely competitive. After all, Apple has its own payments ecosystem and Samsung sells extremely well in emerging markets, while BlackBerry seems to have no strong competitive advantage in the smartphone arena so far. That being said, the BlackBerry 10 is a good product in terms of software and hardware, and could become a strong competitor in the middle run.

The figures showed on the last earnings call made it clear that although the BlackBerry 10 is helping to increase revenue growth (up 15%), it will take more time for it to make some real impact on the revenue base – changes that can make the stock price go up. For those who are risk-averse, it may be better to watch this stock from the sidelines. But if you don’t mind the risk, buying a company that is trading at one-third of potential revenue for this year sounds attractive, specially for those who are patient enough to wait a couple of quarters.

The article BlackBerry: Earnings Were Dim, But the Story’s Not Over originally appeared on Fool.com and is written by Adrian Campos.

Adrian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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