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Blackberry’s new CEO John Chen’s influence on Wall Street earnings

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New York City, New York – (StockNewsDesk) – 09/27/2014 — Blackberry shares opened lower following its second quarter fiscal year 2015 earnings report, but as traders and investors digested the better than expected loss, shares rose gaining 4% at midday.

Smaller Loss than Expected

The Canadian company announced adjusted earnings per share loss of 2 cents with revenues of $916 million. This is an improvement over the year before in which losses came in at 47 cents per share basis, and revenues were $1.57 billion. Notably, the results came in better than Wall Street consensus with a loss of 16 cents per share and $949 million on the top line.

The company reported a onetime charge of $167 million accounting for a change in accounting and tax costs. They also increased their cash reverses, finishing the quarter with $3.1 billion. Despite its troubles, there is no risk of bankruptcy in the short-term.

Blackberry has introduced a brand-new phone this year, the Passport, aimed at enterprise clients. The company’s new CEO, John Chen, has made clear his intention to shift to an enterprise service company from a consumer facing one.

Turn Around Continues

So far, Wall Street has been enthusiastic about John Chen, as the stock price has risen 88.2% from a low of 5.44 in December 2013 to its current level of 10.24. The company is expected to stop losing money by the end of this year, returning to positive cash flow. Margins continue to expand under Chen, as he has aggressively cut costs. This is a closely watched figure by Wall Street. Gains in margins and revenue can lead to exponential gains in stock prices.

Another good sign for the company is the growth of its BBM messaging service, which continues to add subscribers. These improvements have been attributed to Chen’s leadership as he has resolved that the company will be profitable by March 2016. He also has indicated that Blackberry will begin hiring across the board, and software sales will double over the next month.

Blackberry’s new CEO John Chen's influence Wall Street earnings

Blackberry’s CEO John Chen

The Worst Behind for Stock?

The stock price remains depressed from its 2008 highs, when Blackberry was as hot as Apple and Facebook combined. Blackberry had Apple’s dominance in the handset market for smartphones and Facebook’s rich valuation and institutional support. At the time, Blackberry’s phone and email solution was revolutionary.

However, the iPhone, and later Samsung, ended up destroying Blackberry’s business. The stock fell from a high of $150 to a low of $5.44 in December 2013. The stock looks to have been double bottomed at its all-time low, and mid 2012, showing impressive accumulation in the time between.

The encouraging sign is that Blackberry’s rise in stock price has come with improvement in the business, rather than simply a technical bounce. The company is also likely to see increasing hardware sales. Coupled with the increase in services and software revenues based on Chen’s estimate, Blackberry would have a forward P/S which would be cheap for a company growing sales at a 20% basis annually.

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