BlackBerry Ltd is scheduled to release its next earnings report tomorrow, and most analysts aren’t really expecting any big surprises. It’s generally believed that it is just too early to see any big signs of a successful turnaround, although BGC analysts think sales of the Passport smartphone could offer a bit of upside in tomorrow’s earnings results.

BlackBerry Ltd Upgraded By BGC Ahead Of Earnings

BlackBerry upgraded to Buy

In a report dated Dec. 17, 2014, analyst Colin Gillis noted that BlackBerry shares have slumped 7.2% since he downgraded the stock from Buy to Hold in late September. He has now upgraded the stock back to Buy and increased his price target from $11 to $12.50 per share.

In Friday’s report, the analyst expects to see revenue of $978 million, an 18% year over year decline but a 6.8% quarter over quarter increase. He’s estimating losses of 1 cent per share, compared to last year’s loss of 67 cents per share in the same quarter. He expects gross margins of 43% and shipments of 2 million phones with an average selling price of $259.

BlackBerry management’s on a roll

Gillis named six reasons for upgrading BlackBerry in his report. First, he agreed with much of Wall Street in saying the company is in the early stages of a turnaround. However, he said CEO John Chen has a great turnaround track record and has also built up credibility with investors over the last year.

He quickly cut costs and started preserving cash and refocused the company on its main strengths of physical keyboards and security. He also successfully launched new products and filled in gaps with new strategic partnerships.

BlackBerry’s new products could bring upside

Second, the analyst believes sales of the new Passport smartphone could offer some upside in Friday’s earnings report even though the first production run was limited and sold out quickly. He expects $270 million in revenue from the Passport alone, with 450,000 units sold with an average selling price of $600. That’s 52% of their total hardware revenue estimate of $518 million.

Third, BlackBerry launched the new Classic smartphone, bringing a fresh feel to an old favorite with the physical keyboard BlackBerry was originally known for.

Fourth, he likes BES 12, which the company launched last month. BlackBerry has been successfully handing out BES 10 EZ Pass licenses, which offered a free upgrade to BES 12. He said this strategy is a key part of the turnaround process, especially when it comes to converting those free trial, non-paying enterprise customers into paying ones. He wants to see more traction on this front in the next several quarters.

BlackBerry’s finances coming in line

Fifth, he said BlackBerry is approaching management’s target date to become break even on cash flow, which is the end of the fiscal year. He thinks the company might have achieved it in the quarter that’s set to be reported tomorrow.

And finally, he notes that BlackBerry’s market capitalization is $5 billion, so any “modest level of success” could meaningfully reflect in the company’s revenues, cash flows, earnings and stock price. He reminds investors that he downgraded BlackBerry in hopes of seeing a better entry point, which he says has not appeared.