BMO Capital see little hope for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) to turn around the business, there is value in some of the company’s assets. BMO’s price target of $7 is based on a sum-of-the-parts analysis. Analysts rate BlackBerry shares Market Perform.
Below are the key reporting metrics, as well as some of BMO’s recent thoughts on BlackBerry:
Smartphone units – November 3.2 million/February 2.7 million, BB 10 units – November 0.7 million/February 0.7 million. Analysts believe the recent uncertainty about BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s future has exacerbated the shipment picture. They believe legacy BB 7 devices represented the majority of unit volume, as consumers and enterprise customers have grown increasingly skeptical of the long-term viability of the BB 10 portfolio. Analysts do not believe the high-end Z30, which is a large-screen version of the Z10, has been selling particularly well.
Smartphone ASP – November $214/February $212, BB 10 ASP – November $381/February $363. Analysts model ASP levels to remain relatively low, following the sharp drop-off in the August quarter. They believe the weak metric is the result of a combination of factors, including relatively low BB 10 shipments and ongoing price declines aimed to drive volume.
Total revenues – November $1.4 billion/February $1.3 billion. Analysts are below November/February consensus revenues of $1.6 billion/$1.5 billion.
Subscribers – November 64.0 million/February 60.0 million. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) no longer provides the metric directly, but analysts believe the firm is losing at least 4 million subscribers per quarter.
Service revenue – November $676 million/February $605 million, ARPU November $3.50/February $3.36. Analysts model Service revenue of $676 million, down from $724 million in August, owing to weaker subs. They believe ARPU improved slightly to $3.50 in November from $3.44 in August. Analysts believe Service revenue collection issues in Venezuela may persist.
Gross margin – November 34.6%/February 36.3%, Opex – November $685 million/February $550 million. Analysts at the firm expect hardware gross margins to remain negative as device ASP remains weak, although profitability should improve if service revenue as a percentage of the total continues to rise. They do expect lower opex through the end of the year, following a reduction of the device portfolio and lower marketing spending.
EPS – November ($0.43)/February ($0.32). Analysts are in line with consensus November / February EPS of ($0.44)/$(0.33).
It remains BMO’s view that the best path for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is to sell off some or all of its assets. Analysts at the firm see a number of assets that can be sold or divested, but have a hard time coming up with a company that would want to acquire all of the parts. BMO reportedly may get a clearer picture of the ongoing strategy from new CEO John Chen on the call. Below is research firm’s sum-of-the-parts valuation.