Market Overview

Caution: BlackBerry Will Acquire Companies To Hit Sales Targets

Share:
Caution: BlackBerry Will Acquire Companies To Hit Sales Targets
Related BBRY
Jim Cramer Weighs In On Adobe, Blackberry, Energizer, Weight Watchers And More
FTC's Anti-Trust Suit against Qualcomm Remains on Track

Morgan Stanley analysts are out with a warning on BlackBerry Ltd (NASDAQ: BBRY): the company is "acquiring revenue to make software revenue targets."

The company, Morgan Stanley said, is comfortable taking its cash balance down $700 million, to $2.5 billion, in order to acquire companies that help it hit its top-line software revenue goal of $600 million. Against this backdrop, Morgan Stanley said it remains Underweight with a $7 price target – roughly 30 percent below Tuesday's closing price.

On Tuesday, BlackBerry announced it would acquire WatchDox, a secure file sync and sharing platform. Ultimately, Morgan Stanley said, WatchDox will be incorporated into BlackBerry's BES 12 EMM solution, though the product will continue to be sold separately for the time being.

Related Link: Is BlackBerry's $150 Million WatchDox Acquisition Money Well Spent?

Morgan Stanley estimated that, even with this acquisition, BlackBerry will need to acquire another $120 million in revenue to meet its $600 million target. In order for the stock to stay in the $10 range, Morgan Stanley said that the company would need to make these acquisitions at "significantly less than 2x revenue, something they are unlikely to be able to accomplish." That means that the impending acquisitions will be at "dilutive multiples."

Year-to-date, BlackBerry shares have shrunk 8.6 percent. In the prior year, however, the stock has gained more than 40 percent.

Latest Ratings for BBRY

DateFirmActionFromTo
May 2017Raymond JamesDowngradesOutperformMarket Perform
Apr 2017CIBCUpgradesUnderperformerNeutral
Apr 2017MacquarieUpgradesNeutralOutperform

View More Analyst Ratings for BBRY
View the Latest Analyst Ratings

Posted-In: Blackberry Morgan StanleyAnalyst Color Analyst Ratings Tech Best of Benzinga

 

Related Articles (BBRY)

View Comments and Join the Discussion!