BlackBerry Ltd

BlackBerry Ltd (NYSE: BB) provided enterprise and security software to businesses and government across the globe.

On 24 June 2021, BB is due to release its Q1 FY22 results.

Investment Rationale – WATCH at USD 13.82

• The Covid-19 pandemic and related global chip shortage had a material impact on BB’s operations, and its future impact is still uncertain.
• Due to the non-renewal of subscription and account cancellation amid Covid-19, the new customer churn rate remained subdued.
• From a technical standpoint, the stock price is hovering near the upper standard deviation of the Bollinger Bands, while the 14-day RSI (62.21) is also around the overbought level.
• All major valuation multiple (Price/Earnings, Price/Cash Flow, EV/EBITDA, and Price/Book) are overvalued against the industry average.

Risk Assessments

• BB is facing intense competitive pressure, which is leading to rapid technological change, frequent market price reductions, and frequent new product introductions. It is not only impacting the product life cycles but the overall profitability of the business.
• The Covid-19 pandemic and the economic downturn might continue to impact the Company’s operations in the near term.

Recent News

7 June 2021: BB partnered with BiTECH Automotive (Wuhu) Co Ltd for building LCD instrument cluster to be installed in the the UNI-K (Changan Automobile's new SUV).

Financial Highlights for the fiscal year ended 28 February 2021 (as on 31 March 2021)

 (Source: Company Website)

• FY21 results shown a decline in top-line and bottom-line items of the income statement as the recognized revenue stood at US$893 million while BB incurred a net loss of US$1.10 billion.
• On a US GAAP basis, BB reported basic and diluted loss per share of US$1.97.
• As of 28 February 2021, cash, cash equivalents and investments stood at US$804 million.
• At the end of FY21, the principal value of the 1.75% Debentures was US$365 million versus around US$720 million of fair value.

Share Price Chart

 (Analysis done by Kalkine Group)

Conclusion

BB demonstrated weak financial results in FY21. The Company’s QNX automotive software business is likely to remain impacted until early FY22 due to the economic downturn as it continued to adversely affect the automotive software business. Moreover, the Covid-19 disruption can also harm the supply chain and customer demand. Adjacently, volatility in the financial market could also impact the Company’s ability to raise external funds. After reporting losses, the Company also need external funds to pursue growth opportunities. Therefore, the outlook seems gloomy to invest at the current position. The stock made a 52 week High and Low of USD 28.77 and USD 4.37, respectively.

Based on the weak fundamentals, macroeconomic uncertainties, aggravated losses, we have given a “Watch” stance on BlackBerry Ltd at the current price of USD 13.82 (as on 15 June 2021, 12:10 PM ET), while we look forward to reviewing the demand recovery.

AcelRx Pharmaceuticals Inc

AcelRx Pharmaceuticals Inc (Nasdaq: ACRX) is a specialty pharmaceutical entity that is involved in the development and commercialization of DSUVIA® and Zalviso®.

Investment Highlights – SPECULATIVE BUY at USD 1.45

• Despite the pandemic impact, ACRX made solid progress on the DSUVIA’s commercialization since April 2021 recorded the highest ordering since its launch.
• AcelRx is on the verge of a sizeable accomplishment as DSUVIA is expected to gain substantial market acceptance.
• From a technical standpoint, 20-day EMA (~USD 1.43) indicates a bullish momentum in the stock.
• In the past six months, ACRX’s stock price has significantly outperformed the Nasdaq Composite index by delivering over 19% return.

Key Risks

• The Covid-19 related restrictions can impact the commercial sales of the DSUVIA®.
• The Company has a history of operating losses, and hence, it has limited liquidity and capital resources to pursue growth opportunities. Therefore, the expected growth trajectory might not be achieved if it fails to obtain the external funds timely.

Recent News

20 May 2021: AcelRx announced an investigator-initiated study of DSUVIA® for patients with sickle cell disease.

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 17 May 2021)

 (Source: Company website)

• During Q1 FY21, AcelRx reported a significant increase in revenue year-on-year, while the net loss was also remarkably reduced.
• As of 31 March 2021, AcelRx reported US$67.3 million of cash and short-term investments.
• As of April 2021, the Company has achieved 432 formulary approvals.
• During Q1 FY21, ACRX raised nearly US$36.4 million through an underwritten public offering.

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

During Q1 FY21, AcelRx showed significant growth in financial results. However, the ultimate impact of the Covid-19 is highly uncertain. Notwithstanding, the Company has a decent liquidity position to navigate through uncertainties and fund its operations. It has 432 formulary approvals as of 30 April 2021. It is also making solid progress in terms of the commercialization of DSUVIA, which can make the Company profitable. The stock made a 52-week High and Low of USD 2.94 and USD 1.01, respectively. On the technical chart, the next important support level is at USD 1.26.

Based on the improved revenue, reduced losses, commercialization progress, supported by the valuation conducted above, we have given a "SPECULATIVE BUY" stance on AcelRx Pharmaceuticals Inc at the current market price of USD 1.45 (as of 15 June 2021, 12:10 PM ET).

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).