UPDATE: Credit Suisse Downgrades BlackBerry, Notes FCF Burn
In a report published Monday, Credit Suisse analyst Kulbinder Garcha downgraded BlackBerry Limited (NASDAQ: BBRY) from Neutral to Underperform and lowered the price target from $7.00 to $6.00.
Despite underlying operating losses coming in better than expectations, Garcha noted concern over the level of FCF burn and added pressure in services revenue. Credit Suisse reported that BlackBerry burned through $800 million of free cash last quarter, a trend that is expected to continue. The analyst expects net cash of $620 million and $377 million by the end of 2015 and 2016, respectively.
The analyst commented. "[we] believe that the cash balance is sufficient to keep BlackBerry operational for at least 3 years, buying time for a turnaround. We include cash inflows from real estate sales and income tax receivables of $500mn, as well as $600mn in restructuring over two years, we do believe that any more significant cash burn could actually make it very hard to sustain in the long term."
Credit Suisse added that visibility of a turnaround is low. Garcha reported concerns over the declining subscriber base, secular hardware issues, and declining ARPU trends.
The analyst concluded, "We remain doubtful that within the hyper-competitive smartphone market that BlackBerry can create a meaningful business."
Shares of BlackBerry closed at $8.41 on Friday. The stock fell 4.863% to $8.02 shortly following Monday's opening bell.
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