Shares of BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) are down over 5% during midday trading on Wednesday, after a downgrade by Morgan Stanley (NYSE:MS).  The company now rates BlackBerry at “underweight” versus its prior rating of “equal weight” and with a price target of $7.  James Faucette, analyst at Morgan Stanley, said that the sentiment around BlackBerry has become too forgiving and believes the company will struggle to meet sales targets, despite bullishness.  Faucette said Morgan Stanley initially upgraded shares of BlackBerry earlier this year due to the fact that there was too much bearishness and investors did not have high expectations for sales and earnings.  “However, we now believe the pendulum has swung too far in the other direction, and the market is now too willing to give the company the benefit of the doubt that [BlackBerry] will successfully be able to sell its new software and messaging offering” said Faucette in a letter to clients.

BlackBerry Ltd Stock Down After Downgrade

BlackBerry’s restructuring phase

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has been in a rebuilding phase over the past few years, as the company lost its foothold in the mobile market to a consumer that was interested in the Android and iPhone.  Since then, the company has slimmed down, cut costs, and decided to focus on enterprise customers as their primary business.  BlackBerry recently just entered into a partnership with Samsung to promote security and protection for customer data, an effort to prove itself as committed to customer account’s security and customer data protection.  This lead to them recently expressing no interest into expanding operations into China.  Management says that government policies and power would not allow the company to fulfill its promise to protect customer data from intrusion.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) recently released a new and updated software to enterprise customers that would allow them to control several devices such as tablets, Androids, iPhones, etc to be all controllable on one platform.  BlackBerry CEO John Chen has high expectations and outlook for the software.  However, as analysts at Morgan Stanley pointed out in their downgrade report, Chen’s outlook and targets imply that BlackBerry sees customers remain steady or grow, all the while increasing prices three fold with a new product.  The investment bank just does not see this happening, being that BlackBerry still has some struggles in its relatively early venture into enterprise sales.

Can BlackBerry continue its rebound?

Overall, the company is much better off than it was a year ago, and that is what is important.  The stock is up around 40% year to date and looks to be around near the bottom and reemerging.  However, as Morgan Stanley analysts pointed out, investor opinions of BlackBerry have shifted to opposite extremes of pessimism and optimism throughout the year.  At this point, Morgan Stanley sees it current as there being too much optimism with its new platform and customer’s acceptance of higher costs and programs.  Can BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) prove Morgan Stanley wrong and continue on its rebound?

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