BlackBerry (BBRY): Raising Valuation Range On Model Roll Forward, Still Cautious - Wells Fargo

September 29, 2016 7:47 AM EDT
Get Alerts BBRY Hot Sheet
Price: $7.37 -1.47%

Rating Summary:
    7 Buy, 39 Hold, 16 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 14 | Down: 11 | New: 8
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Wells Fargo analyst, Maynard Um, reiterated his Market Perform rating on shares of BlackBerry (NASDAQ: BBRY) but raised his valuation range to $7.80-$8.60 (from $7.25-$8.00) as he rolls the model forward to FY18.

Upside in the quarter was a result of lower D&A while SAF profit upside was offset by Software profit downside. BBRY made the right decision in shuttering its hardware business and focusing on becoming a software company but concerns now revolve around growth and visibility.

Software is expected to grow 30% this FY but the analyst thinks Street forecasts for $692MM in Software rev in FY17 have risk if not for the classification of royalty into the Software segment. He also thinks Street's F18 revenue of $848MM also seems aggressive even when accounting for the reclassification of royalty revenue (we forecast $800MM including royalties of $28MM). Software revenue and profits missed ests this quarter though management maintained FY guidance (resulting in a more back end loaded year).

The analyst raised FY17/Fy18 EPS ests to $0.01/-$0.04 from -$0.08/-$0.09. The key now is driving revenue growth and given limited visibility and the application of a 4x multiple on the Software business, there is no reason to upgrade.

For an analyst ratings summary and ratings history on BlackBerry click here. For more ratings news on BlackBerry click here.

Shares of BlackBerry closed at $8.33 yesterday.

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