BlackBerry Stock Has 30% Downside From Here, Credit Suisse Warns

In a report published Wednesday, Credit Suisse analyst Kulbinder Garcha maintained an Underperform rating on

, with a price target of $6, after the company reported disappointing results. BlackBerry marginally missed consensus expectations, with revenue of $658mn, an EPS loss of $0.05 and a fundamental operating loss of $7mn, versus Credit Suisse estimates of a profit of $4mn. "We continue to have reservations on their ability to ramp up software and operate more competitively, and expect the company to burn cash," analyst Kulbinder Garcha said. The adjusted EPS estimates for FY16 and FY17 have been reduced from -$0.17 to -$0.24 and from -$0.19 to -$0.29, respectively. Although the company's software revenues appeared "solid," Garcha expressed concern regarding the results being boosted by licensing revenues, which could be "partly one time in nature" as well as M&A to some degree. The underlying base business is estimated to have grown by about 20 percent y/y, at "a modest rate at the best," the report stated. Moreover, BlackBerry's full year target of $500mn now includes IP licensing. The company has inked deals with

and an undisclosed party. While this is "reassuring," Garcha expressed doubt around the "prospects given the company's IP portfolio and the inherent volatility of these numbers." In the report Credit Suisse noted, "Services continued to see an accelerated decline, falling at 19% q/q. We continue to see headaches for the Services." "Given the inherent challenges in turning around the services stream, as well as subscale loss making hardware business, we believe it would be best for the company to break up. Assuming shutting down the hardware business by the end of FY16 and winding down services business by the end of FY17, we arrive at NAV of $3.2bn ($6 per share), which suggests an approximate 30% downside from the current market price," the report mentioned.