BlackBerry will probably perform below financial year 2016 projections, believe Morgan Stanley analysts. The likely reason for this is tougher mobile device management in the wake of a saturated market. Also demand for the standalone mobile security platform appears to be less than previously expected.
Unrealistic targets
According to Morgan Stanley’s software team, considering the rate at which BlackBerry is shipping products and generating revenue and profits, the targets from management appear unrealistic. The analysts are no more hoping for a $9 per month average revenue per unit if BlackBerry’s handset range remains flat. From the previous estimate, Morgan Stanley has dropped its expectation to $8 per month.
A major portion of the Canadian company’s enterprise base is alive on legacy devices, with many respondents in Morgan Stanley’ CIO survey expecting to purchase fewer BlackBerry devices. John Chen, CEO of BlackBerry, is expected to bring down operating expenses from full throttle and safeguard the company’s assets, allowing for future optionality. However, it will be a challenge for Chen to carry on with hardware development by bringing down prices and extending product life cycles. And on the software front, the company will be concerned with creating value.
BBM monetization could help BlackBerry
Further, in their report, Morgan Stanley analysts stated that the decline in subscribers may slow owing to BlackBerry Cloud Enterprise mobility and new products and services that fulfill the needs of enterprises. Within the report, the analysts also noted that successful BBM monetization could help the company’s turnaround. However, the analysts view management’s inability to raise operating expense cuts and unimpressive hardware and free software as risks to turnaround.
Morgan Stanley has assigned an Underweight rating to the stock with a price target of $7. The target price is based on the company’s strength to maintain its current asset base and the associated multiple at 1.5 times tangible book value.
Of the 33 analysts covering BlackBerry, four have assigned a Buy on the stock, ten have given it a Hold, and ten have rated it as a Sell. Cormark Securities analyst Richard Tse has assigned $14 price target on the stock, which is the highest by any analyst, while the lowest price target price target of $5 is from Berenberg analyst Adnaan Ahmad, according to Bloomberg terminal.
On Friday, BlackBerry shares closed 2.29%, and year to date, the stock is down by almost 11%.
