BlackBerry Still Has Work To Do After $815-Million Settlement With Qualcomm

BlackBerry LtdBBRYwinning endQUALCOMM, Inc.QCOM

Todd Coupland, an analyst at CIBC's Institutional Equity Research, felt the settlement win is reason enough to upgrade the company's stock from Underperformer to Neutral with an unchanged $10 price target. Although the cash portion of the settlement alone represents $1.54 per BlackBerry share, the analyst believes that alone is not enough to move the company's overall financials.

Wait Until At Least 2018

Related Links: BlackBerry Shares Above $9 For First Time Since January 2016 The BlackBerry-Qualcomm Arbitration Case, Explained

Coupland believes that despite the settlement win, investors need to wait for BlackBerry's growth story to play out beyond fiscal 2018.

BlackBerry's management said that its 2018 revenue growth will come from enterprise device management and the auto sector, but the analyst is waiting for evidence that some of the company's automotive test projects will turn into commercial programs.

In addition, Coupland suggested that an earnings per share of $0.50 could be achieved at current margin and OPEX levels, but revenue would need to be around $1.3 billion, which is above the Street's 2018 estimate of $1 billion.

Bottom line, Coupland believes BlackBerry's stock is "modestly undervalued" based on its 2018 targets, and a "more material" auto thesis could turn the analyst incrementally bullish.