31 March 2021

BlackBerry Shares Plunge Despite In-Line Q4 Profit

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News shaping
the markets today

     

What’s happening: Shares of BlackBerry Ltd fell in extended trading on Tuesday, despite the company reporting in-line earnings for the fourth quarter.

What happened: BlackBerry’s stock had recently spiked, but not due to the company’s fourth-quarter results. It’s one of the stocks that has grabbed investor attention after a social media driven short squeeze frenzy.

The shares came under pressure amid profit taking and some disappointment related to BlackBerry’s revenues for the quarter.

How were the results: The security and infotainment software company reported a decline in sales for the fourth quarter.

  • Revenues fell to $210 million, missing the consensus estimate of $245.1 million.
  • Net loss widened to $315 million, or 56 cents per share, from $130 million, or 23 cents per share, in the same quarter a year ago.
  • Excluding one-off items, earnings came in at 3 cents per share, matching market views.

Why it matters: BlackBerry, which was once a leader in the mobile phone industry, has been focussing on security software for companies and governments as well as infotainment software for the automotive industry in recent years.

BlackBerry was among the stocks that received major attention from retail investors after being targeted in online chatrooms for boosting its share price. In late January, the company’s stock hit a 52-week high and has gained more than 40% year to date.

During the fourth quarter, the company entered negotiations for selling a part of its patent portfolio related to mobile devices, messaging, and wireless networking. The company limited its patent monetization activities amid the recent talks. BlackBerry pointed out that licensing revenues would have been higher during the quarter, if it had not been in negotiations.

The company recorded sales growth for its QNX car software, despite demand being impacted by its major customers, including Ford and Volkswagen, remaining under pressure amid the slow rebound in the US auto market due to the covid-19 pandemic. CEO John Chen also mentioned that QNX continued to recover, “despite new challenges from the global chip shortage.”

Management projected GAAP revenues, excluding licensing revenue, between $675 million and $715 million for the full year.

What to watch: Investors will keep an eye on the company’s ongoing negotiations related to the sale of its patent portfolio. The negotiations may further impact the company’s upcoming results. Markets will also monitor the recovery in BlackBerry’s QNX's car software sales.

The Markets Today

     

European stocks will be in focus today, ahead of inflation data scheduled for release later in the day.

Context: European markets settled higher on Tuesday amid optimism of a faster recovery in the global markets.

Details: Global equity markets recorded gains on Tuesday, with investors brushing off concerns around global banks facing huge losses from a US hedge fund defaulting on margin calls. The news had negatively impacted global banking shares on Monday and triggered a sell-off in US stocks on Tuesday.

Shares of Credit Suisse remained under pressure on Tuesday, falling another 3% after the US hedge fund was forced to liquidate its position in various media stocks. Both Credit Suisse and Nomura warned that the forced liquidation could be a significant hit to their earnings.

Markets also seemed to ignore concerns around the yields on US 10-year Treasury bonds beginning to rise again.

Instead, investors focused on positive economic data from the Eurozone. Economic sentiment in the region surged to 101 points in March, from 93.4 in the previous month, meaningfully exceeding market expectations of 96.

The pan-European Stoxx 600 rose 0.71% on Tuesday, with auto stocks leading the surge. London’s FTSE 100 gained 0.53%, while the German DAX 30 and French 40 added 1.29% and 1.21%, respectively.

What to watch: Markets await inflation data from the Eurozone. Consumer price inflation, which was confirmed at 0.9% year-over-year in February, is expected to rise to 1.3% in March.

Rising covid-19 cases remain a top concern for markets, with total global infections surging past 128.1 million.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.31%, 0.32% and 0.53%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s unemployment rate and unemployment change, UK’s business investment, current account, gross domestic product and nationwide housing prices, France's consumer price inflation rate, household spending and industrial producer prices, Turkey's balance of trade and economic optimism index, Spain's current account, Italy’s consumer price index, India’s central government budget value, infrastructure output and current account, Brazil’s unemployment rate and budget value, South Africa's balance of trade, Russia’s money supply M2, Canada’s GDP and industrial product price index as well as the US MBA mortgage applications, ADP employment change, Chicago PMI, pending home sales and EIA’s crude oil inventories,.

 

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