Blackberry Ltd (NASDAQ:BBRY) (TSE:BB) shares were down 4% on Monday ahead of the company’s third quarter earnings report. Blackberry is set to report its third quarter earnings on Dec. 19, and analysts are a bit cautious ahead of the release. In their recent report, both BMO Capital and Raymond James analysts reiterated their Market Perform rating on the Canadian company.
Monetization more important
BMO analyst Tim Long set a price target of $10 per share. He noted in the report that their November quarter revenue estimate of $875 million in revenue and earnings per share of 8 cents are below the consensus estimate of $960 million in revenue and earnings per share of 5 cents. Long expects hardware revenues to be below consensus estimates with Passport volumes counterbalancing the dropping legacy sales.
His gross margin estimate is above the consensus estimate on the back of the expected lower hardware mix. Also quarterly results are not more relevant “than signs of software monetization,” but there will not be any clear signs until the February quarter results, wrote the analyst.
Increased expectations from BlackBerry
In another recent report, Raymond James’ Kevin Li and Johnathan Lo noted that expectations this time are higher when compared to the past year, and in the near-term, financial viability is not a concern, but the company still needs to establish that it can counterbalance drops in service access fees with the new value-added services.
The analysts at Raymond James projected service revenues of $373 million, which is a drop of 12% quarter over quarter and is in line with management estimates. There were around 5.1 million licenses issued for EZ Pass in November, which is an increase of 50% from the 3.4 million when last reported on Sept. 26. Around 1.7 million licenses were brought in from competitors, which according to the analysts, is encouraging, but it does not clearly indicate anything until there are pay conversions. EZ Pass users have the option to update to BES12 for free.
The Waterloo, Ontario-based company has offered new value-added services and launched a range of new services, which if they succeed in capturing the market, could result in fueling the ARPU generated and therefore, counterbalance the SAF decline, believe the analysts.
