Canada-based technology firm BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has had a rough couple of years, with earnings dropping and its stock price tumbling into the single digits. However, Jefferies Equity Research released a report today on smartphone maker BlackBerry suggesting that the worst is likely over for the company, and that the stock currently offers a balanced risk-reward profile. They rate the stock a Hold, and raised their 12-month price target from $6 to $9.

Sum-of-the parts analysis of BlackBerry

Jefferies’ SOTP analysis modeled the newly reorganized BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) across six key segments.

1) Legacy Consumer Services: Carriers currently pay a monthly fee for BB7 subs, but will not for BB10 subs. The analysis assumes all of the ~44M consumer subs disappear by FY20.

2) Legacy Enterprise Services: BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) continue to earn monthly fees from businesses that stay on BB7. The analysis assumes many of these will leave over the next couple of years, but that some will remain because of switching costs.

3) BB10 MDM: The company receives payment for providing higher value-added MDM services on enterprise BB10 handsets.

4) iOS/Android MDM: The management of non-BBRY devices is a new opportunity for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). While the company could succeed, it is clearly behind competitors like AirWatch (just acquired by VMware, Inc. (NYSE:VMW)) and MobileIron.

5) Enterprise HW: The company will only be a niche enterprise hardware provider in the future.

6) BB10 Consumer HW: While the Foxconn Technology Co., Ltd. (TPE:2354) (OTCMKTS:FXCOF) deal removes BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s inventory risk in this segment, barring a blockbuster product, the lower overall margins means the success or failure of the Foxconn partnership is not of major import to the company’s future earnings.

Blackberry Sales

Blackberry sales vs growth

Valuation and risks

Jefferies analysts Peter Misek, Jason North and Blly Kim explain their valuation model and the related risks below.

“Based on our FY15 estimates, our $9 price target is 0.4x EV/revs, below peers’ CY14 mean of 0.8x due to sub-scale position.

Risks: 1) BB10 fails; 2) current subscriber base declines more quickly than expected; 3) lack of acquisition interest.”