Earnings Alert! Is BlackBerry Stock a Buy After its Q2 Event?

The Canadian technology firm BlackBerry (TSX:BB)(NYSE:BB) announced its latest quarterly results on Tuesday after the market closing bell. Despite its largely better-than-expected results, its stock seems to be under pressure. At the time of writing on Wednesday, BB stock was trading with a nearly 2% loss for the day at $6.86 per share. Before we discuss whether or not this dip in BlackBerry stock could be a buying opportunity for long-term investors, let’s take a closer look at some key highlights from its quarterly earnings report.

BlackBerry’s Q2 2023 cybersecurity revenue fell

BlackBerry is a Waterloo-based enterprise software company that currently has a market cap of $4 billion. While it mainly generates most of its revenue from its cybersecurity segment, the company has been focusing on expanding its IoT (Internet of Things) segment offerings lately. In its fiscal year 2022 (ended in February), BlackBerry generated nearly 66% of its total revenue from the cybersecurity segment, while its IoT segment accounted for about 25%.

In the second quarter of its fiscal year 2023 (ended in August), BlackBerry reported a 4% YoY (year-over-year) decline in its total revenue to US$168 million. While its IoT segment revenue jumped by 28% from a year ago, an 8% YoY drop in cybersecurity revenue mainly drove its total revenue figure lower. Now, the company expects its cybersecurity revenue in the third quarter to be flat on a YoY basis.

Overall, a decline in BlackBerry’s cybersecurity software unit revenue and its seemingly disappointing Q3 expectation could be the main reasons for hurting investors’ sentiments and driving BB stock lower after its earnings event. On the positive side, BlackBerry highlighted that its cybersecurity billings in Q2 stood at US$102 billion, reflecting a 15% sequential increase.

But its Q2 earnings beat estimates

In the August quarter, BlackBerry’s IoT segment gross margin stood solid at 82%, much stronger than its cybersecurity gross margin of 55%. As a result, the company’s overall adjusted gross margin stood at 64% for the quarter. With this, BB reported an adjusted net loss of US$29 billion in Q2 — narrower than its adjusted net loss of US$33 million in the corresponding quarter of the previous fiscal year and also significantly better than Street’s expectation of a US$39.5 million loss.

Is BlackBerry stock worth considering on the dip?

BlackBerry is continuing to focus on the development of its IVY intelligent vehicle data platform, which could significantly accelerate its IoT segment growth in the long run. In the August quarter, BlackBerry used its IVY Innovation Fund, launched in March 2021, to invest in an artificial intelligence-focused German tech start-up named COMPREDICT.

In the last few months, temporary macroeconomic uncertainties and fears of a near-term recession have forced businesses across the world to cut their cost burden. This could be one of the reasons why BlackBerry’s cybersecurity sales might not showcase a big growth in the next couple of quarters. Nonetheless, as more businesses build their online presence in the post-pandemic world amid rising cyberthreats, I expect the demand for its trusted cybersecurity solutions to increase sharply in the coming years. Considering its bright cybersecurity and IoT outlook, I find BB stock an attractive buy to hold for the long term when it’s down 42% on a year-to-date basis.

The post Earnings Alert! Is BlackBerry Stock a Buy After its Q2 Event? appeared first on The Motley Fool Canada.

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The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.