BlackBerry Ltd Price Target Raised After Results

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BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) released its latest earnings report earlier this week, posting losses that weren’t as bad as expected. Analysts are starting to weigh in on those results, and while many still don’t see much of a future for the company, a few firms have raised their price targets.

BlackBerry makes progress

In one report dated June 19, 2014, RBC Capital Markets analysts Mark Sue, Paul Treiber and Ameet Prabhu increased their price target from $11 to $12 per share. They maintained their Sector Perform rating on the company. They believe BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) is actually making some progress in its turnaround efforts. They actually think the company’s target for breakeven cash flow is “within reach.”

They note that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s declines in service revenues are slowing down and that the company’s handset division is almost profitable. Also the company’s channel inventory is declining, and there appears to be solid uptake of BES 10 and the upcoming BES 12, as 10% of the 1.2 million licenses BlackBerry has distributed came from competitors’ licenses that were traded in.

BlackBerry’s cash flow, inventory, hardware look better

According to the RBC Capital team, BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) could see a bit of a cash flow headwind in the second half of the current calendar year. The analysts cite the upcoming new handsets, which are the Passport and the Classic.

The company’s service revenue fell 10% quarter over quarter, which was a little better than their estimate of 13%. The analysts believe the lower decline in this segment is due to upselling from newer value-add services like premium enterprise services. They also say subscriber attrition appears to be slowing down.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has begun the next hardware cycle and reported a 23% quarter over quarter increase in handset sales, which rose to 1.6 million. The company launched the Z3 handset during the quarter.

BBM, QNX show promise

The RBC team also noted that BBM and QNX are still in their early stages but called them “enticing.” BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) reported 85 million monthly active users of BBM and a total of 160 million users. The company expects to see its monthly active users for the messaging app to hit 100 million by the end of this year, thanks to the app’s launch on Windows phone and the pre-loading of it on the Lumia handsets. BlackBerry management expects BBM to generate $100 million in revenue during the 2016 fiscal year, mainly because of the launch of BBM Protected, which is targeted at enterprise customers.

Although the company did not say how much revenue it got from QNX, it did say it expects growth there to continue thanks to “new design wins” in the automotive segment and also new verticals like healthcare. The RBC team notes that royalty revenue from QNX comes with high margins, which could give BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s profitability a boost over time.

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