Shares of Blackberry fell slightly on the morning of March 9th after Goldman Sachs analyst Simona Jankowski downgraded her rating on the stock from Neutral to Sell and cut her price target from $10 to $9.
Blackberry has seen a huge positive turnaround since John Chen took over as CEO in November 2013, having risen over 60%. As a result, the company set expectations for itself to become cash flow positive this year.
One of the reasons for Blackberry’s turnaround is due to its shift of focus from smartphones to software. Back in November, Blackberry launched its BES 12 platform that was designed for businesses that connects with all mobile devices, including all Blackberry phones. They even got 5.1 million licenses to sign up for a free trial of its platform until the end of January.
Jankowski’s downgrade stems from her fear that it will be challenging for Blackberry to shift from cuttings costs to save money to actually driving revenue despite the success the company has seen over the last year. Accordingly, the analyst forecasts widening losses in fiscal 2016 and 2017.
Jankowski lists two reasons for why she expects Blackberry’s losses to widen: “First, [Goldman Sachs’] surveys show very low buying intentions for BlackBerry’s EMM solution. Second, its target implies that it would leapfrog the market leaders in just one year, which [she] view[s] as unlikely given the competitors’ much better traction (based on our survey).” She added, “While we see significant upside in Hardware revenues, those are “empty calories” as they are not profitable. Thus, we see widening losses based on the shortfall in high-margin Software and Services revenues.”
Simona Jankowski has an overall success rate of 64% recommending stocks and a +13.4% average return per recommendation. She has rated Blackberry 31 times since April 2009, earning an 88% success rate recommending the company and a +30.8% average return per BBRY recommendation.
Jankowski is known for rating stocks under the technology sector, such as Cisco Systems and Infinera. She has rated Cisco Systems 15 times since April 2009, earning an 83% success rate recommending the company and a +16.2% average return per CSCO recommendation. Likewise, the analyst has rated Infinera 4 times since September 2010 with a 100% success rate recommending the stock and a +51.4% average return per INFN recommendation.
However, Jankowski is not always accurate with her recommendations. She has rated Juniper Networks 8 times since March 2011 with a 20% success rate recommending the stock and a -29.7% average loss per JNPR recommendation.
There has been a lot of buzz surrounding Blackberry over the last year as to whether the company can turn things around. Do you trust Simona Jankowski’s bearish recommendation based on her financial advice history?
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Carly Forster writes about stock market news. She can be reached at [email protected]