Sentiment around BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) may be starting to shift toward the positive, although the company is still a long way from breaking even with its cash flow. Most analysts agree that BlackBerry is no longer near death, although they vary in just how far they believe BlackBerry has come

BlackBerry

Cormack upgrades BlackBerry

Analyst Richard Tse upgraded BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) from Market Perform to Speculative Buy today. Despite the upgrade, however, he continues to expect BlackBerry to report declines on its core business. He’s expecting the company to report $.9 billion in revenue, which is slightly lower than consensus, at $1.11 billion.

He expects BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) to post losses of 78 cents per share, which is far worse than consensus, at losses of 53 cents a share. And he predicts that the company will sell 1.8 million handsets, which is in line with consensus estimates.

In spite of his low estimates, Tse thinks positive news reports and “non-operating changes” will keep driving the positive sentiment which has resulted in shares climbing 24%. The analyst increased his price target from $7.50 to $11.50 a share.

BlackBerry to aim for break even

RBC Capital analyst Mark Sue also noted that challenges remain for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). He said liquidity isn’t a near-term risk anymore because the company is expecting U.S. tax refunds amounting to $500 million this quarter. BlackBerry also expects to see between $300 million and $400 million from sales of real estate, which will increase the company’s net cash balance of $2.2 billion.

While some are skeptical about how long it could take BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) to become cash flow breakeven. According to Sue, however, that could happen at around $600 million per quarter in operating expenditures. He said in order for BlackBerry to reach this level, it will have to use the partnership with Foxconn Technology Co., Ltd. (TPE:2354) (OTCMKTS:FXFCOF) to push gross margins up into at least the middle of the 30s.

In the third fiscal quarter, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s operating expenditures were $823 million, compared to its guidance of $600 million.

BlackBerry must chart a course

Sue said if service revenue continues to fall off or if demand for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s smartphones doesn’t improve, the company will need to make more cuts. He also noted that the company’s enterprise business must remain stable, assuming between 15 million and 20 million enterprise subscribers, which he said is about 5 million to 7 million handset shipments every year and $1.6 billion in service revenue.

According to Sue, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) could post a 11% revenue decline at $1.06 billion for the fourth fiscal quarter. The analyst is expecting losses of 51 cents per share for the quarter and has reiterated his Sector Perform rating and $11 per share price target on the stock.