BlackBerry (BBRY) Estimates Expected to Keep Rising as BB10 Expands - Goldman

March 14, 2013 8:17 AM EDT
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BlackBerry (Nasdaq: BBRY) is ticking higher following an announcement Wednesday afternoon of a large, one million BB10 unit order by an established partner. The stock closed up 8.2 percent on the session.

Goldman Sachs is out with a few comments heading into BlackBerry's fourth-quarter 2013 report, which is expected on March 28th. The firm expects Street estimates to keep rising into the results and upside to ASP margins from BB10 launch. Limited upside is expected for BlackBerry's Q4 results than the following two quarters given the February launch of BB10.

Goldman sees Z10 sell-through of 500,000 units for the last month of the February quarter, with a sell-in of 650,000 units. Given expansion plans, the firm sees BlackBerry selling two million to three million BB10 units per quarter for the rest of calendar 2013.

Given the Z10's pricing, ASP is expected to be $500, which exceeds $227 reported in BlackBerry's November quarter. Goldman stated, "As a result, we expect the Z10 ramp to drive a significant increase to BlackBerry’s ASPs and margins, implying upside to consensus estimates in FY4Q and to a greater extent in the May and August quarters, which include 3 months of shipments globally as opposed to 1 month of shipments in limited regions in FY4Q (Feb)."

The Z10 had a relatively successful launch, Goldman noted. The firm highlighted several key points following recent checks:
  • The Z10 was constantly ranked in the top three to four devices by popularity. Importantly, the Z10 has been able to maintain hype over the last few weeks following launch;

  • There have been low returns and positive feedback. Goldman commented, "In past launches, we have observed that the return rate is usually high for devices that are not doing well post launch."

  • Inventory is being well-managed with stock-outs a rare occurrence. Most stores are selling outs of lots withing a few days, but they are restocked quickly. Notably, Goldman said that stores in India reported stock-outs within two days, but a new round of units were expected to be in within 24 hours; and

  • There is also decent interest in the Q10 launch. The device is expected to be release in April or May and is the first QWERTY-equipped BB10 device. Goldman noted that margins might be lower, leading to a slight decrease in ASP. But, the keyboard will draw more dedicated fans back in as well as provide an attractive alternative choice for enterprise users.

For Q413, Goldman lowered estimates on expectations of an earlier BB10 launch. The firm now sees a loss of 23 cents on revs of $3.13 billion, from a loss of 17 cents and revs of $3.24 billion prior. The Street is currently at a loss of 29 cents per share and revs of $2.84 billion.

Fiscal 2013 revs are expected to be $11.55 billion with a loss of $1.17 per share. Revs move up to $13.53 billion in FY14 with a loss of 20 cents per share.

Following Wednesday's news, Goldman is keeping BlackBerry at Buy with a $19 price target.

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 $15.65 yesterday.

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