Shares of BlackBerry Ltd (NYSE:BB) remain under immense short selling pressure in the market. The stock has shed more than 40% in market value from this year’s highs. The sell-off has come at the backdrop of the broader market turns bearish. Technology stocks have come under pressure in recent months amidst soaring trade tensions between the U.S and China.
BlackBerry Price Analysis
BlackBerry spiked higher in October on delivering of better than expected Q2 financial results depicted by double-digit growth in net income. Software and services revenue was also up by 4%. Fast forward investors sentiments in the stock appear to have taken a hit, fuelling the recent sell-off of the stock. However, the waning investor’s confidence in the stock has not come on any fundamental problems or weakness in the overall business.
After a breach of the $9 a share support level, the stock remains susceptible to further drops. The next stop after the recent fall is the $6 a share handle, the next substantial support level. The management has sought to avert a further slid of the stock by reiterating ambitions to pursue organic growth.
$1.4 Billion Cyclance Acquisition
BlackBerry has since confirmed that it is in the process of completing the acquisition of artificial intelligence company Cyclance. The Canadian cybersecurity company is to pay $1.4 billion, as it looks to strengthen its business empire in the selling of software. BlackBerry has embarked on a restructuring drive. The company is in the process of transitioning from the business of making smartphones as it looks to focus more on the business of selling software. In addition, the company is pursuing opportunities in emerging businesses such as self-driving vehicles. The acquisition of Cyclance affirms the company’s commitment to developing software for next-gen autonomous vehicles through its QNX unit. The California based firm that BlackBerry is acquiring has made a name for itself for developing AI-driven cybersecurity products for preventing cyber-attacks. “Clancy’s leadership in artificial intelligence and cybersecurity will immediately complement our entire portfolio, UEM, and QNX in particular,” said BlackBerry CEO John Chen.
Cyclance Integration Synergies
High-skilled cybersecurity workforce, as well as a market-leading portfolio of endpoint solutions, are some of the attributes that make Cyclance stand out as an ideal acquisition. The company’s solutions should go a long way in strengthening BlackBerry’s Unified Endpoint Management as well as QNX business. The solution should also enhance the Canadian company’s capabilities on BlackBerry Spark further strengthening its prospects on Enterprise of Things. Cyclance comes into the deal with about 3,500 enterprise clients made up of 100 fortune 500 companies. It also boasts of deep connection with government agencies. BlackBerry intends to integrate Cyclance technology in its Spark platform even though it will operate as a separate business unit
While BlackBerry has come under immense pressure in recent past, its willingness to spend big all in the effort of strengthening its growth prospects is a plus. Cyclance acquisition should expand the company’ operations into new markets and in return strengthen its cybersecurity business portfolio. After the recent drop, the next earnings report expected on December 19, 2018, could have a significant impact on the stock’s performance heading into 2019. Investors expect the company to post earnings of $0.02 a share, which would indicate a year-over-year decline of 33.33%. Revenues, on the other hand, could come in at $212.5 million representing a 5.94%. Investor sentiments have edged lower in the wake of the broader stock market turning bearish. Earnings beating estimates could go a long way in strengthening the stock’s sentiments in the market. Given that BlackBerry is yet to experience, any weakness in fundamentals, earnings beat could be a catalyst that would push the stock up after the recent sell-off.