Bank Of America: Further Downside In Blackberry 'Limited' After 40% Loss

The bearish case for BlackBerry Ltd BB can no longer be justified after the stock's 40% decline over the past year, according to BofA.

The Analyst

Bank of America analyst Daniel Bartus upgraded Blackberry's stock from Underperform to Neutral with a price target lifted from $6 to $7.

The Thesis

Blackberry is composed of five business units and the company is worth $5.05 per share under a bear case, $6.95 per share under a base case, and as much as $9.46 under a bull case, Bartus said. As such, the stock likely has support at the $5 level, which implies "limited" downside potential and the potential for "substantial upside."

Bartus said a bullish stance can't yet be justified as Blackberry remains a "show-me story" and better execution is needed moving forward. The company boasts some attractive assets, including Cylance, which is a leader in next-generation endpoint protection platforms. However, Cylance is suffering from three issues that need to be resolved, including acquisition uncertainty like sales turnover and a shift from endpoint protection to endpoint detection.

The QNX auto segment has lost some momentum recently but remains a leader in the lucrative auto software industry back by strong partnerships with leading chipmakers.

The Athoc business has "some potential" for a turnaround and could be seen as an "underappreciated" asset.

Blackberry's stock is trading valuation at 2.2 times 2021 EV/Sales versus peers that are mostly north of three times. The research firm's revised $7 price target is based on a peer consistent multiple of three times 2021 EV/Sales.

Price Action

Shares of Blackberry were trading higher by 2% at $5.61.

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BofA: BlackBerry's Cylance Acquisition Excites, But There's No Fire In Spark Platform