Sections of BlackBerry Limited (NYSE: BB), the one – time smartphone maker turned into a security software expert, has declined in trading on Friday morning, and is now down 11.5% from 11:05 am EST.
The fall comes after BlackBerry described earnings it described as “hard” yesterday afternoon, and ahead of analysts’ expectations. But the shares are still down. Why?
From a pro forma perspective, BlackBerry exceeded expectations. Adjusted earnings for the third fiscal quarter of 2020 were $ 0.02 per share, compared to the analysts ’$ 0.01 per share loss. Adjusted quarterly sales of $ 224 million were similarly higher than forecast for $ 219.7 million.
But here’s the thing: According to generally accepted accounting principles (GAAP), revenue was only $ 218 million, a decline of 18% from the second quarter of last year. BlackBerry’s overall profit margin on these sales also plunged, falling 590 basis points to land at just 68.3%.
Result: Despite making deep cuts to both research and development and other operating costs, BlackBerry’s operating loss for the quadruple quarter was $ 127 million, and the company’s GAAP net lost more than three as much as $ 0.23 per installment.
In a short time, the BlackBerry ruling could make all the arguments they wanted about the quarter “firm” – but the numbers still look pretty bad. In total, BlackBerry has now lost $ 830 million in losses over the past 12 months. Revenues are slipping and profit margins are shrinking.
While the company is still generating cash ($ 56 million over the past year), at a current valuation of 83 times FCF, the stock looks too much to me – even after selling today .