BlackBerry is preparing to release its next earnings report later this week, and all eyes will be on the company’s software business. BlackBerry QNX is a key part of that segment, and most investors expect it to become increasingly important as the battle for the automotive computing market rages on.
Price target increased for Qualcomm, BlackBerry QNX
In a note to investors dated June 20, Morgan Stanley analyst James E. Faucette said he raised his price target for BlackBerry from $7 to $10 per share and reiterated his Equal-weight rating. He explained that most of the price target increase was for the Canadian firm’s win over Qualcomm, although he added that the rest was for “modest uptick” for the company’s automotive segment, BlackBerry QNX.
Yarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More
He expects BlackBerry QNX to drive momentum for the company in fiscal 2019 and 2020, and noted that thus far, the automotive operating system has been used in infotainment platforms. However, he added that investors are now looking forward to other opportunities related to the connected car, such as automatic driver assistance systems (ADAS) or over-the-air firmware updates.
BlackBerry QNX to face new competition
He added that bulls predict the number of use cases for BlackBerry QNX to triple the amount of licensed content per vehicle, but he thinks it will be difficult to sustain such large share gains in automotive profits. He noted that all of the major automakers are working on their own systems software to set themselves apart from competitors.
Although some aspects of the automotive software will probably still be outsourced to tech firms, he notes that Google and Apple are also said to be working on their own ecosystems to compete with BlackBerry QNX. He does see BlackBerry Radar as offering another growth opportunity for the company in trucking but adds that other asset management solutions providers that already have their own sticky user bases are also pursuing the same market.
He expects BlackBerry QNX revenue to increase to about $260 million in fiscal 2020 from about $130 million in fiscal 2017. He expects connected car or ADAS license sales to fetch up to $16 per vehicle, an increase from the current $3 to $5 per vehicle for BlackBerry QNX currently. The bull case scenario is higher at about $21 per vehicle and 20% of global light vehicle shipments by fiscal 2023.
BlackBerry earnings on tap for Friday
BlackBerry is set to release its next quarterly earnings report on Friday, and investors are looking forward to the company’s plan for reorganized reporting. The company previously put all software revenue into one segment without breaking out BlackBerry QNX and the other parts.
Consensus estimates suggest that the Canadian firm will break even on $264.5 million in revenue. The last time the company reported earnings in March, its stock surged on the surprise adjusted profit, as it seems that the company has made the transition to being a software firm. Shares of BlackBerry have climbed by nearly 50% over the last three months. The stock ticked lower by as much as 0.14% to $10.73 during regular trading hours on the NASDAQ on Tuesday.