BlackBerry shares continued to climb in premarket trading this morning after surging on Friday due to stronger than expected earnings results. At least two firms have upped their price targets for the struggling Canadian smartphone maker, but most remain cautious until there are more signs that managements turnaround efforts are working.

BlackBerry Ltd Earnings: Analysts Weigh In

However, clearly some investors are willing to take a risk on BlackBerry because of Friday’s earnings report as BlackBerry shares rose by more than 3% in premarket trading on the NASDAQ this morning, closing in on $9 per share after surging on Friday. The company posted non-GAAP losses of 3 cents per share and sales of $557 million, which beat Wall Street’s estimate of 15 cents per share in losses and $491 million in sales

BlackBerry price targets raised

BMO Capital Markets analyst Tim Long said in his Dec. 20 report that he has bumped up his price target for BlackBerry from $7 to $8 per share. He kept his Market Perform rating on the stock, however. He noted that while the company’s November quarter report was mostly positive, it received a boost of $53 million in nonrecurring patent licensing revenues.

One bit of good news for BlackBerry was that even without the patent licensing boost, software revenue was still slightly better than expected. Phone sales were also better than expected, possibly boosted by strength in BlackBerry’s Android-based slider phone, the Priv. The company’s gross margin was also a little better than expected due to product mix, although lower service fees partially offset the upside in the other segments.

Deutsche Bank analyst Vijay Bhagavath, Ph.D. called the results “decent” and upped his price target from $6 to $7 per share but maintained his Hold rating on the stock. He continues to see “meaningful” sequential volatility in device sales, margins and earnings and remains concerned about the rapidly deteriorating core service demand, slow handset demand and profit challenges.

Will BlackBerry hit its software target?

Long bumped up his earnings estimate for fiscal 2016 from a loss of 38 cents per share to a loss of 31 cents per share, although his fiscal 2017 estimate moves downward by a penny to 31 cents per share. He believes that management is on track to reach their target of $500 million in software revenue in the current fiscal year “but with a lot of help.

Excluding the one-time patent licensing revenue and revenue from BlackBerry’s four recent acquisitions, he estimates software revenues for fiscal 2016 at $300 million for BlackBerry Enterprise Service, BlackBerry Messenger and the QNX automotive operating system. Long added that this estimate suggests that his previous estimate was potentially too high because it depended on organic growth to reach $500 million.

However, he is still positive on growth in the software segment and notes that only the tumbling service revenues and handset business are holding BlackBerry back.

Goldman remains Sell-rated on BlackBerry

Goldman Sachs analyst Simona Jankowski and team noted that BlackBerry management did not reiterate their previous guide of hitting $500 million in software revenue with last week’s earnings report. This could suggest a problem that investors are overlooking. Of course they didn’t say that the company won’t hit the target either.

The Goldman team estimates that the Good Technology acquisition contributed about $25 million in revenues for the company, which was significantly higher than their $12 million estimate. This revenue was not incorporated into the consensus estimate. Organic revenue grew from $73 million in the previous quarter to $77 million in the November quarter.

While some believe that the earnings report showed evidence that BlackBerry is turning a corner, the Goldman team remains bearish on the struggling company because they think the hardware and service segments are just heavy weights on it. Both segments showed continued signs of deterioration, and Jankowski believes last week’s earnings report simply demonstrates continued challenges.

The sequential acceleration in service revenue declines makes it even more urgent that the company figure out how to replace both the cash flows and profits it previously saw from the segment. They maintained their Sell rating and $6 per share price target on BlackBerry, although they significantly raised their earnings estimate for fiscal 2016 from a loss of 43 cents per share to 27 cents. Their fiscal 2017 estimate moves from a loss of 67 cents to 46 cents per share, while their fiscal 2018 estimate moves from 70 cents to 55 cents per share.

BlackBerry hardware heading to breakeven?

Raymond James analyst Steven Li said in his Dec. 18 report that the expanded rollout of the Priv could help the company’s handset division reach breakeven. BlackBerry shipped 700,000 handsets during the November quarter, continuing to lose money as shipments fell 19% sequentially and 66% year over year. However, the company is rolling the Priv to more countries soon, boosting the number from four to 31. As a result, shipments could improve.

“Higher volumes plus the step-function decline (~60 mln/Q) expected in the amortization expense pertaining to royalties embedded in hardware COGS could bring hardware back to breakeven in our view.”

Looking at a year over year basis, the software business recorded a 43% organic increase on an easy comparison. Although the BlackBerry Enterprise Service did show signs of improving traction, Li is still not impressed by the growth rate, so he maintained his Market Perform rating and $8 per share price target on the stock.

The Raymond James analyst remains watchful of signs of commoditization in enterprise mobility as management warned about this. Further, adoption of BlackBerry Enterprise Service and other value-added services has been going more slowly than expected. The company is expected to unveil its plans in the Internet of Things and self-driving cars at next month’s Consumer Electronics Show, but for now, Li believes the best enterprise mobility management is the best area for BlackBerry.

The bullish view of BlackBerry

BGC analyst Colin Gillis remains one of the very few analysts who are bullish on BlackBerry, calling Friday’s earnings report “a privvy good quarter.” He noted that although the Canadian firm shipped fewer handsets in the November quarter, the segment’s revenue climbed 6% quarter over quarter on the back of an improvement in average selling price, which moved from $240 in the previous quarter to $315. In order to reach breakeven, the hardware business must sell 5 million phones per year.

Other bright areas in last week’s earnings report include the cost reductions from integrating Good Technology and the fact that the November quarter was the seventh consecutive in which BlackBerry recorded positive free cash flow. Gillis expects the company to slow down its pace of acquisitions in security but possible pursue Internet of Things companies. He also believes management is “adequately executing on its plan to transform into a software company, adding additional services to its device management offering, and expanding the customer base via opportunity.”

“We continue to see opportunity in owning the stock for those investors who can tolerate the time frame and volatility associated with special situation assets like BlackBerry,” he added.