BLACKBERRY STOCK VALUATION 2020 - SECURING STOCK NEWS | Stock News Sunday By Jannes Poelmans

Did you know that BlackBerry still exists? I'll walk you through my evaluation of the BlackBerry stock, after some economic news of last week. Let's begin. What is up friends and enemies. My name is Jannes, and this is Stock News Sunday. And if you're new to the channel and you like learning about stocks, reviewing companies, and other investment related topics. Consider clicking the subscribe button and ring the notification bell to be updated about future content.

And let's start off about unemployment. Again. A survey shows that most Americans believe their layoff to be temporary, but research tells us that it might not be as temporary as they would hope it to be. One would even be able to call the layoffs... permanent.

As this article from CNBC shows, 78% of Americans believe their unemployment to be temporary, but research from the University of Chicago's Becker Friedman Institute predicts that 42 percent of the layoffs will be permanent due to demand shifts or because the company won't survive the current crisis. And well, if your company doesn't exist anymore, it will be kind of hard to get the job back. But what do you expect from these people? Their layoff was probably meant to be temporary. They are trying to stay positive and look forward to going back to work to contribute to society. And for these people who actually want to go back to work, not just because they missed their paycheck, but because they actually want to work.

I'm pretty sure that these people, never will be permanently unemployed. These people, who actually want to work, will always find work. It might not be their dream job and the pay might not be great. But they will always find work. And the same article says that companies such as Amazon, Walmart, Lowe's, Dollar General, Papa John's, Domino's have all announced plans to hire more workers as a stay at home orders shift consumer behavior.

Right now, we have kind of a reallocation shock, where the economy can majorly transform and some types of jobs and industry can cease to exist while others can expand. So yeah, you might lose your current job. But there are some companies that are really profiting from the current situation and they are taking this opportunity to expand their operations. So if you are willing to work at these companies, you can probably find a job there. The next article says that reopening the economy will have a much smaller impact than expected.

Christopher Meisner and Peter Lin, economists from the Department of Economics at UC Davis, wrote in a working paper for the National Bureau of Economic Research: "If the disease is still out there and people perceive it to be dangerous to go out, they will not go out. Also, the rest of the world is in a recession, too, and the reopening will have a much smaller than expected impact. Reopening states can only help a shortage of supply, but without any demand for the products being produced, the economy has no real way of recovering. It may be a bit disheartening, but it is very true. If people are too scared to go to your store, it does not matter that you're open.

So you won't need your personnel and unemployment stays as high as it is right now. And since almost the entire world is in lockdown, and there is a worldwide economic crisis, export is basically non-existent. So unemployment might not drop as fast as expected, but we still have to open up some time. It cannot be an excuse not to open up the economy. But as you can see in this chart from Goldman Sachs, the states that have already reopened only show a slightly faster rise in economic activity than the rest of the US.

As long as we don't have a vaccine, a lot of people will not feel comfortable going to the store so demand won't go back to normal. Once the vaccine is ready, demand can slowly start rising again to normal levels. So sadly the economic recovery might take longer than we expected. Which gives me a very smooth transition into the next articles, which are saying exactly that. The Fed gave out a warning that there is a long road ahead for the US economic recovery.

And some top economists are saying that it will take years for the economy to recover. S&P global chief US economist, Beth Ann Bovino, says that they are not expecting the US to return to pre-crisis levels for two years. And that markets and some other economists seem to be a little bit more optimistic than they are. The fact that, in spite of the current economic events, the stock market's keep rising, makes her very nervous. Which is something that I fully understand.

I also believe that markets, right now, are too high. Especially the American markets, which are probably helped by all of the incentives of the Fed. New York Fed President, John Williams, says that he expects some difficult months coming up, but he does expect some recovery in the second half of 2020. The only question is how strong. Fed Vice Chairman Richard Clarida said: "The net effect, I believe, will be for aggregate demand to decline relative to aggregate supply, both in the near term and over the medium term.

" So in human terms: supply will rise faster than demand. He's basically saying what all of us already know and what everybody else is saying. Production will rise again, but will probably not be as high as before the lockdown. And since we still have social distancing and a lot of people are scared, the sales won't really rise as fast. But somehow he found the most complicated and difficult way of saying this really simple thing.

Fed Chairman, Jerome Powell, said that the current crisis could create a longer-term and lasting damage in the form of unmasked bankruptcies and skills deteriorating among the working classes. Those taking the brunt of the fallout, are those least able to bear it. Can I be honest with you? The main thing that I learned from this article of the Fed is that if you want to work for the Fed, all you have to be able to do is think logically and say everything in a difficult yet eloquent way. Powell did say one joke that generally made me laugh and that is that economic forecasting exists to make astrology look respectable. It's really easy to look at these economists as if they have all of the answers of the future.

But they don't. They're also just estimating and guessing. They just have a lot more experience with the guesswork, but they can be as right or wrong as you are. The last article is about a common saying that you might have heard if you're an investor in the stock market. Which is 'Sell in May and go away' It is basically saying that you should sell all of your stocks in May and buy them back in November, because generally stocks underperform in the summer months.

And looking at the strategy, it does generally give you a high return if you actually do it. In 2013 it gave you a 10% high return, but in 2011 you would have underperformed the market by 8%. But this article is saying that this year, the sell in May and go away strategy might not work. Darell Cronk, president of the Wells Fargo investment institute, says that we may actually see a more normal summer to the spring and the fall type activity, because people aren't going away. Typically, when volume dries up, you get these extreme moves in the market.

Small amounts of either news or sentiment can push markets too far in either direction. I guess we'll see what's going to happen soon enough. Which brings me to the indexes. And all of the indexes that I follow rose this week. With Belgium rising the least, with the rise of one percent.

Then we have the S&P 500, with the rise of 3.2 percent. France comes in third rising 3.9 percent. The Netherlands finished second, with 4.8% And this week, Germany has won with a rise of a whopping 5.8 percent. That brings me to my valuation of the BlackBerry stock as requested by KK. And if you want me to take a look at a stock, feel free to ask In the comments below.

These videos take me a long time to research and make, so if you get any value out of this, consider smashing the like button for the YouTube algorithm. Because it really helps with the channel. So did you know that Blackberry still exists? Because I didn't. I just assumed they stopped because I couldn't find any phones or tablets anywhere. But they still exist.

Blackberry was founded in 1984 as Research in Motion and has its headquarters in Waterloo, Ontario, Canada. Right now, instead of making smartphones or tablets, they focus on IOT solutions. Wwhich stands for the Internet of Things. And they focus on cybersecurity, mainly based on artificial intelligence. In February 2019 Blackberry acquired Cylance for 1.4 billion dollars to further goal to become the leader in providing end-to-end mobility services that are secure and trusted. Now the switch to becoming a cyber security company did take a lot of time and money.

They have basically been restructuring since 2011, and it wasn't until 2014, which is fiscal year 2015, that they decided to really hone in on cyber security. All of this thanks to their new CEO John S. Chen, who joined the company in 2013, which is fiscal year 2014. Sadly, when I was doing my research, I could only find blackberry on one of the lists of the 'top cyber security companies' This can be a sign that Blackberry has to step up their marketing game and become better known to the general public. Blackberry does focus on corporations and that clientele includes all the governments of the G7 countries, as well as the 10 largest commercial banks, 10 of the world's largest insurance companies, some car manufacturers, Continental, and many more.

But it would still be a good thing for Blackberry to appear in this list, because they attract investors. And as I said in this video, the company with the best products isn't necessarily the best company to invest in. Marketing is extremely important. Blackberry is listed in the USA, Canada, Switzerland, Germany, Mexico, Great Britain, and Argentina. And finally, I want to clarify something before we dive into the numbers.

If you were paying attention, you probably heard me say '2014 which is fiscal year 2015' That is because the fiscal year of Blackberry starts at March and it ends at the end of February. And fiscal years are named after the Year they end in. That also means that, right now, Blackberry is in fiscal year 2021. Now before we take a look at my GLORIOUS SPREADSHEET. A quick disclaimer: I'm not a financial analyst nor do I claim to be.

If you do decide to trade with the information that you find in this video, it is at your own risk and I cannot give you any guarantees. And you shouldn't just trust any random guy on YouTube with investment advice. Let's start off, as usual, with the income statement. You can see that revenue is dropping pretty fast, but starts rising again in 2020. It worries me that it only shows a marginal rise in 2020, because that is after the acquisition of Cylance.

You can also see that they stopped reporting different revenue streams after 2017. Probably because they stopped selling hardware or the sales are so low that it can be neglected. When it comes to the profit or loss before tax, then you can see that they had a really good year in 2018, but that is mainly because of the arbitration awards and settlements. BlackBerry has a settlement with Panasonic where they gain 9 million US dollars. They won an arbitration against Qualcomm for a total gain of 962 million US dollars.

And lost an arbitration against Nokia and lost 148 million u. s. dollars. I don't know about you, but in my opinion we can actually ignore these types of gains because we can't rely on them for a company to become successful. But it's still a good thing that they got a lot of money out of these settlements and arbitrations.

Which brings us to the margins. Up until 2017, we can still use the gross profit margin because the company was still selling goods. After that, we'd have to look at the EBITDA to revenue ratio, because the company becomes completely service focused. So looking at the gross profit margin, we can see that the gross profit margin for hardware was abysmal. They were most likely slowing down operations in order to stop production without making clients angry.

But the last two years, they were actually running at the negative margin. Which means it ended up costing them more money to produce the products, than they were worth in sales. And you can also see why the gross profit margin is almost useless for a service, since the service has a ridiculously high margin. The EBITDA to revenue ratio for the last three years was actually not too bad.2018 was extremely high, since the arbitration is still included in the EBITDA and 2020 was pretty low because the brunt of the restructuring costs due to the acquisition of Cylance were in 2020. Cylance was only acquired at the very end of fiscal year 2019, so of course the restructuring cost would only happen in 2020 and will still probably be visible in the coming years.

the amount of outstanding shares has been fairly steady for the past years, even though it rose a bit faster in the past two years. But still a 2.5 percent change isn't all too high when it comes to dilution. And there are no dividends, so dividend investors are again missing out on another company. When it comes to the cash flow statements, there actually isn't too much special to look at. Cash flow from operations was low in 2020, but when compared to the two previous years, the main difference was again the arbitration.

What is remarkable about the cash flow from investments, is that they were able to absorb all of the acquisition of Cylance with the maturation of their short-term investments. Which is why I don't see a rise in the cash flow from investments in 2019. Cash flow from financing is mainly the repurchasing or issuance of shares, but it doesn't change all too much. The extremely high number for the financing in 2017 is because they repurchased a lot of debentures. And they did issue some new ones, so they will have to repurchase those in the future.

For those of you who don't know what a debenture is, a debenture is basically an unsecured bond. Or at least it is the American definition for it and it is also the way it is used here. Blackberrys free cash flow is generally negative, meaning they will probably have to be financed in the future, and the net cash flow from fiscal year 2020 was -156 million US dollars. Resulting in a cash and cash equivalents position of 426 million US dollars, which is enough to pay for almost six months of expenses under normal circumstances. Which brings us to the balance sheet.

on February 28, 2020 Blackberry had about 3.9 billion US dollars in assets; 1.4 billion in liabilities; bringing the book value to 2.5 billion US dollars or 4.57 dollars per share. Subtracting the 2.4 billion in goodwill and intangible assets, we get a tangible book value of 177 million US dollars or 32 cents per share. Blackberry also has a current ratio of 1.07, so they should be able to pay off their short-term debts. For the ratios I used the closing price of last Friday, which was 4.54. Which gives us a PB value of 0.99 a tangible PB value of 14.21 and a p/e ratio of -16.81. I would like to compare Blackberry to Cisco, since they also do a lot of cybersecurity and IOT solutions.

With palo alto networks, a company who I did find consistently on these 'top cybersecurity company' lists. With NortonLifeLock, which used to be Symantec and Fortinet. Both cybersecurity companies. And just so you know, when I value a company that is consistently making a loss, I tend to be a little bit more conservative with my valuation because the company has not been able to prove that their strategy works. And to be honest, it was quite difficult to make a valuation of the BlackBerry stock, because the ratios of this other companies were all over the place.

We have an enormous p/e ratio for Norton compared to its PB value, Fortinet who just has high ratios overall. PaloAlto who has a negative tangible PB value, and Cisco with an enormous tangible PB. But I did decide on a PB value of 1.4. That way it stays below the 1.47 of the profitable Norton, which would also means a tangible PB value of 18.5 and a p/e ratio of -22. Which is still acceptable when you compare them to the competition.

That would bring my valuation of the BlackBerry stock to a $6 per share. Now just to double check my valuation, I did use the valuation technique of Benjamin Graham and try to estimate the earnings per share for the coming five years. I am assuming that this year they can become break-even because Cylance will be further integrated. And after that I am assuming a modest growth. That way we would get an average earnings per share for the coming five years of 61 cents.

Now in order to get the same valuation as with the ratios, we would need a multiplication factor of 10. Which is, in my opinion, a fairly low multiplication factor for this sector. Which is good, because that means my average earnings per share does have some margin for error, which is something that I can really use with the current economic situation. So I will stick to my valuation of $6 per share. Now let's take the target price of the professional analysts.

And according to marketscreener, the average target price is $5.57. So my valuation differs about seven percent with the professional analysts, but you have to remember that a valuation is just an opinion and we can all be completely wrong. Anyway, if you did get some value out of this and you didn't fall asleep in the process. Make sure to destroy the like button and share the video for YouTube algorithm. I post three videos a week, every Tuesday, Thursday, and Sunday.

So subscribe if you want to see more. And let me know what your valuation is for the BlackBerry stock and why in the comments below. See you.

Source : Jannes Poelmans