Will BlackBerry Shares Turn Around After a Strong Q3?

BlackBerry Limited (BB) shares briefly rose more than 6% on Thursday morning after the company reported better-than-expected third quarter financial results. Revenue fell 3% to $228 million – beating consensus estimates by $14.63 million – and non-GAAP earnings per share of five cents beat consensus estimates by three cents per share.

Over the coming year, the company anticipates 2019 revenue growth of 8% to 10%, positive adjusted earnings per share and positive free cash flow. The acquisition of Cylance could further improve these figures over the long term as BlackBerry incorporates AI-based cybersecurity into its suite of Enterprise-of-Things (EOT) solutions.

The upcoming price action will likely be driven by analyst commentary and ratings changes following the earnings announcement and conference call. After BlackBerry's second quarter earnings, Morgan Stanley analysts suggested that the enterprise software company's 2020 growth expectations were too high and reiterated an Equal-Weight rating on the shares with a $10.00 price target.

Technical chart showing the performance of BlackBerry Limited (BB) stock

From a technical standpoint, BlackBerry stock trades near key S2 support levels at $7.40 after giving up most of its early gains. The relative strength index (RSI) remains oversold with a reading of 27.13, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These indicators suggest that the stock could see more downside ahead.

Traders should watch for a breakdown from S2 support levels, which could lead to a move lower to retest 52-week lows at $7.34 or long-term trendline support at around $7.00. If the stock rebounds back above S1 support at $8.10, traders could see a move to test the pivot point and 50-day moving average at around $8.90 over the near term.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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