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What’s behind the bump at BlackBerry?

BlackBerry Stock Price Analysis

BlackBerry has seen more than its share of tough times, but shares of the Waterloo, Ontario-based technology company have jumped more than 32% this year, led by optimism surrounding CEO John Chen and a hope that the company can slowly start to turn itself around.

For the first-quarter, BlackBerry lost $0.11 a share on $966 million in revenue, topping analysts’ estimates, as the company shipped and generated revenue on 1.6 million smartphones. On the conference call, Chen said that if BlackBerry can ship 10 million phones a year, the company can be profitable on the venture going forward. That’s a far cry from days past, and with revenue down 60% year over year, a far cry from where BlackBerry was just a year ago.

During the quarter, BlackBerry smartphone sales actually came in at 2.6 million, indicating that customer demand is much greater than the 1.6 million shipment number. On an annualized basis, that’s more than 10 million phones, suggesting that BlackBerry may have a chance at being profitable by the end of the fiscal year on its handset basis, despite Apple and Samsung accounting for much, if not all of the profit at the high-end of the smartphone sector.

“Our performance in fiscal Q1 demonstrates that we are firmly on track to achieve important milestones, including our financial objectives and delivering a strong product portfolio,” Chen said in the company press release. “Over the past six months, we have focused on improving efficiency in all aspects of our operations to drive cost reductions and margin improvement. Looking forward, we are focusing on our growth plan to enable our return to profitability.”

Since coming on board and taking over from Thorsten Heins, Chen has not only improve the perception surrounding BlackBerry, the results are actually starting to back up his claims the company can survive. During the quarter, the company’s cash balance rose $429 million sequentially to $3.1 billion, though that was aided by a large tax refund and sale of company real estate. Cash makes up more than 50% of BlackBerry’s market cap, an indication that investors value little else about the company.

The company will never be able to compete with the likes of the aforementioned Apple and Samsung in the high-end of the smartphone market, despite having invented the market nearly a decade ago. Its market share was a miniscule 0.5% in the first quarter of 2013, according to IDC, compared to 81.1% for Android and 15.1% for Apple’s iOS. That’s down from 13.6%, just three years ago, as the world has increasingly adopted iOS and Android in place of BlackBerry.

However, Chen has given shareholders hope, perhaps the most important thing. The company has struck deals with Foxconn to manufacture phones for it, with Amazon to work on the company’s app ecosystem, and with Apple and Google to bring the company’s messaging platform, BBM, to iOS and Android. BlackBerry is targeting $100 million in revenue for BBM in fiscal 2016, nothing to sneeze at for a messaging service. It has slightly more than 85 million monthly active users, but the company hopes it can get past 100 million by the end of the calendar year, no small feat.

Chen, who helped turn Sybase around before selling it to SAP a few years ago, has helped the company so that it now expects to break even on a cash flow basis by the end of 201, a far cry from the days when it was bleeding cash. The company still has strong assets in services and enterprise security, and the company recently launched Project Ion to focus on the “Internet of Things” market, a market Cisco has said in the past will generate $14.4 trillion in revenue over the next nine years.

BlackBerry may never be the power house it once was in the mid-2000’s, but if the company can stop burning cash (it burned through $255 million this quarter), and Chen and team can sell 10 million+ phones a year, the company has the opportunity to become a profitable business. That’s something investors couldn’t dream of, just a few short quarters ago.