Wells Fargo Maintains Market Perform on Blackberry, Raises Valuation
In a report published Thursday, Wells Fargo analyst Maynard Um maintained Market Perform on Blackberry (NASDAQ: BBRY), raising valuation range to $8.00-$9.00 from $6.50-$7.00.
According to the report, the valuation range is based on roughly 0.60x EV/Sales (FY2015E). BBRY faces several risks including services business model transition, uncertain BB10 demand, lack of strong ecosystem and potential enterprise market share loss, among others.
“With cash burn improvement expected this quarter relative to the November quarter and the additional $250MM from Fairfax, liquidity concerns are now less of an issue,” the report noted. “Additionally, we believe there is scope for further cost realignment (which we believed would be necessary) as well as asset sales. The Foxconn hardware deal should also reduce working capital risks and improve margins. However, our concern is two-fold - 1) that BBRY will have to be aggressive on pricing or subsidize hardware in order to convert BB7 to BB10 users and 2) that Software revenue growth will not be enough initially to offset Service revenue declines.”
Some highlights from the report included:
-John Chen, permanent CEO, is viewed as a positive given his previous turnaround experience. -Foxconn partnership can help to shield balance sheet and P&L.
BBRY closed Wednesday at $8.52.
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