Stocks

BlackBerry Ltd And Its ‘Leaps of Faith’

BlackBerry stock is more of an option “than investment right now,” believes Sterne Agee CRT’s Rob Cihra. The analyst initiated coverage on the Canadian firm with a Neutral rating and a price target of $6.

BlackBerry Ltd And Its 'Leaps of Faith'

Three vectors of “opportunity/direction”

In the near term, Cihra said all the firms in the mobile and consumer technology space could face weaker demand for smartphones, PCs, tablets and TVs, especially in Europe and China. He also notes that BlackBerry is transforming its business and economic model to recurring software.

Presently, BlackBerry is a “shadow of its former self” in the smartphone segment and has been able to lower its costs for positive cash flow. Based on this approach, Cihra listed three “vectors of opportunity/direction” for the Canadian firm, noting that all these vectors would “still require investor leaps of faith.”

First is Enterprise Software, where the firm is working to replace monthly service fees from the BB subscribers with subscriptions from new value-added software/services. But Cihra sees it to be a challenge as the Canadian firm’s installed base is sharply “eroding so multi-OS is a necessity not feature.”

Second is Hardware. In FY16, the Canadian firm is expected to ship fewer than 4 million units of its proprietary hardware, a year over year decline of 46%. The constant decline in the number of shipments raises questions about whether or not the business is sustainable, “with device gross margins the ultimate hurdle, recently back into double-digit negatives again.”

Third is IoT, where Cihra believes the Canadian firm has done well by coming up with an IoT platform which will be using the QNX embedded software. However, initially revenue from the segment will be low, so investors may not pay much for it now.

Challenges ahead for BlackBerry

Credit Suisse analyst Kulbinder Garcha sees major challenges for the company in its services and hardware business. Garcha notes that if BlackBerry exits its hardware business by FY16 and services by 2017, then the Net Asset Value would be $3.2 billion or $6 per share. This suggests a downside of around 10% from the current market price. Credit Suisse has an Underperform rating on BlackBerry with a price target of $6.

On Tuesday, BlackBerry shares closed down 4.44% at $6.02. Year to date, the stock is down by over 45% while in the last year, shares are down 41%.

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  • DEVVVV

    Re: “best of both worlds” you do realized they can’t put two os’s on one device? Well they probably could but it would be a power hog. Chen is simply doing the wrong thing, and that I would not lie about. I do not want to see Blackberry die, or should I say RIM. RIM is embossed on the next generation smartphone, including the period as its one of the mics I think.

  • DEVVVV

    Sorry but wrong!! The Passport may have been ok if it was deemed as a mini tablet but as a phone NO!! Priv also because its android whereas really there was nothing wrong with BB10 0s it will fail. Josh a long time BlackBerry supporter has now dropped Blackberry because of this change to android. Chen has made a huge mistake.

  • Frenchman75

    You’re completely wrong. The demand for the Passport was weak due to the lack of Apps on BB10. Period! Chen is finally addressing the issue by bringing the best of both worlds to the market: The largest app selection combined with BlackBerry’s best in class security & communication focused software suite, with an optional physical keyboard! Just check out the 280K+ views on the YouTube video with 95% likes, and you’ll see that a lot of consumers want to buy the PRIV! Finally a game changer for Blackberry!

  • DEVVVV

    HollyB, sorry to say but James Faucette of MS has been right with his prediction of less than $7 a share. I knew he would be correct on his statement.

  • DEVVVV

    If that is the case then you might as well say good bye to BlackBerry as the end is near. A device that prompts the wow factor is the only thing that will save BlackBerry and believe me the slider device is not it as it will flop as the Passport did.

  • harshbuster

    A lot of hayseeds took a bath on this one!

  • HollyBolly

    Analyst are bias; no one can tell me anything differently. Their bosses say…write this and that is what they do.
    JMO.

  • Frenchman75

    You keep on spamming every single Blackberry article on the internet but let me tell you that you’re just wasting your time Dave Hargreaves. Nobody cares about what you say.

  • DEVVVV

    How can BlackBerry believe in faith, when they have absolutely no faith in a x- user claiming the answer pertaining to their demise? Re: “In the near term, Cihra said all the firms in the mobile and consumer technology space could face weaker demand for smartphones, PCs, tablets and TVs, especially in Europe and China. He also notes that BlackBerry is transforming its business and economic model to recurring software.” This is because no one has heard of the real next generation smartphone I have designed. Too bad BlackBerry shows no interest in what will become the standard in the smartphone arena. Chen is preventing BlackBerry from moving forward. Can you believe a CEO accepting the production of a Android phone without knowledge of the Android OS?