BlackBerry's Balance Sheet Buys Time Despite Lack Of Software Traction, Scotiabank Says

In a report published Wednesday, Scotiabank analyst Daniel Chan maintained a Sector Perform rating on

, with a price target of $9.50, after the company reported disappointing 1Q results. BlackBerry results missed expectations, although software revenue outperformed, driven by IP license agreements with

and another company. For the second consecutive quarter, BlackBerry's software revenue grew around 20 percent y/y. Analyst Daniel Chan estimated that the company's organic software revenue came in at approximately $67M or sequentially flat. "Although this implies slower growth than expected, we remind investors that this growth is achieved before BlackBerry's sales channel has completely come online. In 2H/F16, carriers are expected to offer BlackBerry's products, including BES Cloud and WorkLife," Chan wrote. In the report Scotiabank noted, "We believe the fact that BlackBerry was able to receive license fees from a powerful company, such as Cisco, implies other deals are likely to follow. The IEEE ranks BlackBerry's patent portfolio as 6th most powerful in the communications space. Using a recent IP transaction, we believe BlackBerry's patent portfolio can be worth over $2B." While expressing optimism regarding BlackBerry's growth opportunities, Chan pointed out that visibility remained low. "We're still not seeing strong software traction, but the company's strong balance sheet buys the company time and optionality."