BlackBerry Will Fall 20% Before Anything Gets Better, Credit Suisse Warns

BlackBerry Ltd BBRY reported its revenue at $487 million, 13 percent below the consensus expectations, with EPS of -$0.03, which beat the estimate.

Credit Suisse’s Kulbinder Garcha reiterated an Underperform rating on the company, with a price target of $6.

Continued Hardware Decline

The analyst expressed concern regarding the continued decline of the hardware business, as well as the quality of some of BlackBerry’s Software acquisitions, including Good Technology.

The company reported Hardware revenues of $190 million, representing a 15 percent year on year and 31 percent quarter on quarter decline. Corporate gross margins, however, beat the estimate at 48.7 percent.

“While ASPs remained stable at around $315, management noted that saturation at the high end of the smartphone market pressured unit sales, which came in at around 600k units,” Garcha mentioned.

The analyst expects hardware revenues at $725 million for 2017.

Challenging Transition

Garcha also expects the company to see a difficult period of transition, given that the Services segment continues to witness accelerated decline, falling 54 percent year on year.

While Software revenues were in-line with the estimate, Garcha expressed skepticism regarding the sustainability of the business, given the unpredictability of IP licensing revenues.

The FY17 EPS estimate has been lowered from -$0.30 to -$0.39.