Why BlackBerry Is Likely To 'Disappoint Meaningfully'

Analysts at Wells Fargo believe that BlackBerry Ltd BBRY is fully valued heading into earnings. Although they did highlight the potential for strategic actions (further restructuring, divestitures or multi-platform strategy) to cause an upside surprise, the bottom line from the note is that the company's revenue and performance are likely to "disappoint meaningfully."

First, Wells Fargo said that the Street's expectations that revenue would gain 1.1 percent was likely very optimistic. Instead, Wells Fargo said it expects revenue to decline 9 percent, partly due to the fact that BlackBerry Classic device sales would be pushed to next quarter.

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Some of these negative revenue pressures will be partially offset by improving capital expenditures, the analysts noted. An EPS beat that is driven by capex cuts is not material to the long-term BlackBerry story, Wells argued.

Additional risks to the business come from a transition in the services business model, uncertain BB10 demand and potential share loss in the enterprise market.

Since the potential for a sale of the company, at least in the immediate term, is limited, Wells valued BlackBerry in a $9.50 to $10.50 range. The stock recently traded at $9.55, up 0.37 percent.