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BlackBerry's Earning Preview

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BlackBerry Limited (NASDAQ: BBRY) will report fourth quarter 2014 results on Friday, March 28, 2014.

BlackBerry's fourth quarter EPS estimate is -$0.56 versus the prior EPS of $0.22. BlackBerry is expected to report 1.13 billion in revenue.

Credit Suisse analyst Kulbinder Garcha is looking for revenue of $992mn (-63% yoy/-17% qoq) with GM of 37% (up 300bps qoq), driving the EPS estimate of -$0.46. The analyst assumes 1.6 million in smartphones shipment in the February quarter, down 16 percent quarter-on-quarter.

In the earnings preview, Garcha wrote, “We believe the company is in the process of significantly de-emphasizing hardware business by transferring manufacturing and inventory management to Foxconn. While the transition means that device volume will probably continue to decline, we think the strategy can reduce operational risk, release cash from working capital, and improve overall cash generation.” Credit Suisse has a Neutral rating on BlackBerry with a $7.00 price target.

J. Moorman from S&P Capital IQ has a Hold rating and $10.00 price target on BlackBerry. S&P Capital expects a 37% drop in FY14, a 35% decrease in FY15, and a 2% increase in FY16. Moorman noted that the launch of the Z10 came in below his expectations and added that the Q10 is “experiencing weak demand.” The analyst commented that a new strategy by CEO John Chen could aid in streamlining the handset business.

Moorman reported, “We expect the company to focus on physical keyboards, security, and monetizing software. However, we believe the company still has a long way to go to rebuild its relationships with enterprises, particularly those that have already left the platform.”

Wells Fargo Securities analyst Maynard Um emphasized that Blackberry may look at “other strategic alternatives”. The firm holds a Market Perform rating and $9.50-$10.50 valuation range on Blackberry. Um expects the company to see improvement in gross margin and DSO, and a potential $300-$500 million tax benefit in the fourth quarter. The analyst remains to have concerns over maintenance/ service revenue, price drops, competitive landscape, and continued churn.

In a report published Monday, Wells Fargo emphasized the concern over the continued churn noting, “While the hardware price reductions may help to stem some churn, we believe pressures in the consumer market from low-priced Android smartphones and in the enterprise market driven by lingering effects from uncertainties with regard to BlackBerry's commitment (when it put itself up for sale) will continue to have an impact on subscriber churn. We believe consumers, which we believe accounts for around 80% of its installed base (and mostly in emerging countries), could see churn continue over time as the company focuses on stabilizing its enterprise base. Given the larger installed base of consumer, this could result in continued churn over the forseeable future.”

Shares of BlackBerry closed at $9.05 on Thursday.

Latest Ratings for BBRY

DateFirmActionFromTo
Jun 2014MacquarieMaintainsUnderperform
Jun 2014Evercore PartnersUpgradesUnderweightEqualweight
Jun 2014CIBCMaintainsSector Underperformer

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Posted-In: Credit Suisse J. MoormanAnalyst Color Earnings News Previews Analyst Ratings Trading Ideas

 

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