Understanding BlackBerry’s Vision of Fiscal 2018

Improvement in gross margin

BlackBerry (BBRY) expects its gross margin to reach 70% in fiscal 2018, which would be an improvement of 800 basis points, as compared to gross margin of 62% in fiscal 2018. BlackBerry is looking to invest in growth initiatives and focus on channel management in fiscal 2018 to drive revenue, reduce costs, and improve profit margins.

As we discussed in Part 1 of this series, BlackBerry’s Software and Services segment accounted for 47% of total revenues in fiscal 2017—up from 23% in fiscal 2016—which indicates that BlackBerry is shifting toward a software model.

Understanding BlackBerry’s Vision of Fiscal 2018

The firm also stated that it has consolidated its software business “to enable tighter product and go-to-market integration.” This has increased efficiency in BlackBerry’s sales channel, thereby increasing customer value.

BlackBerry expects its Software and Services revenue to rise at a rate higher than the overall market. In fiscal 2018, the firm expects its Software and Services revenue to rise between 13% and 15%, and BlackBerry aims to post non-GAAP (generally accepted accounting principles) net profit and to achieve positive free cash flow in fiscal 2018.

What do analysts expect from BlackBerry?

BlackBerry (BBRY) will announce its fiscal 1Q18 earnings in June 2017. Analysts estimate that the company will post revenues of ~$264.5 million, with a low estimate of ~$245.8 million and a high estimate of ~$298 million for the quarter, which ends in May 2017.

The company’s EPS (earnings per share) is estimated to be $0.01, with a high estimate of $0.04 and a low estimate of -$0.02. If BlackBerry meets the analysts’ revenue estimate of $264.5 million, it would mean a YoY (year-over-year) fall of 37.6% from fiscal 1Q17.

Notably, BlackBerry beat the analyst EPS estimates in fiscal 3Q17 by 300% at $0.02. BlackBerry also beat the analysts’ EPS estimate in fiscal 4Q16, fiscal 1Q17, and fiscal 2Q17.

BlackBerry has a market cap of $4.9 billion. By comparison, peer tech (QQQ) companies International Game Tech (IGT), IBM (IBM), and Cisco Systems (CSCO) have market caps of $4.5 billion, $148 billion, and $171 billion, respectively.

Continue to the next and final part for a look at the current analyst recommendations for BlackBerry stock.