BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) stocks have been on the rise since last week, now over $10 for the first time in months, as expectations over the next generation of handsets, confidence in CEO John Chen’s strategy and a surprisingly strong quarterly earnings report has given investor sentiment a much needed boost.

BlackBerry

‘Management has earned another chance’: GMP

“We upgrade to a Hold on improved execution and slower than expected declines in subscribers and service margins. We believe management has earned another chance to prove the value of new BlackBerry products and services to its core customers,” writes GMP analyst Deepak Kaushal.

Kaushal notes that while subscriptions are still falling, they appear to be leveling off to a core group of 30 million users who will continue to use BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) phones and services. Meanwhile BBM has 85 million active users, which management expects to generate $100 million revenue in F2016, and QNX is making inroads in mobile payments, healthcare, and cloud services. Stable devices revenues and improved monetization of its software services (also including BlackBerry Enterprise Server) could bring the company back to profitability.

Kaushal also points to improved execution, as evidenced in BlackBerry Ltd’s (NASDAQ:BBRY) (TSE:BB) recovering adjusted gross margins, which hit 47.9% against the 21% that he had forecast, putting margins backs at F2010 levels and rising. Hardware revenue was disappointing, falling to $379 million versus his estimated $688 million, but hardware gross margins were improved. Taken together, Kaushal thinks that there are enough promising developments to wait and see what else Chen has in store this year, but he warns that the company still faces “high risk in transition to a smaller niche software and services company.”

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Net cash up on tax refunds, real estate sales

In addition to upgrading BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) to a Hold, Kaushal has increased his price target from the bottom to the top of his sum of the parts valuation: $4.80 – $7.81 per share plus an estimated $1.61 net cash per share in F2016. Net cash went up recently from $2.67 per share to $3.32 per share, but this was because of a large tax refund and some real estate sales. If you exclude those two items as non-recurring the cash burn was $255 million or $0.48 per share last quarter, but it’s still early in the company’s turnaround efforts so this isn’t really a strike against the BlackBerry bulls.