UPDATE: Goldman Sachs Downgrades BlackBerry (BBRY) to Sell; Losses Will Widen, Says Analyst

(Updated - March 9, 2015 8:35 AM EDT)

Goldman Sachs downgraded BlackBerry (NASDAQ: BBRY) from Neutral to Sell with a price target of $9 (from $10). Analyst Simona Jankowski believes turnaround efforts have reached a challenging phase, as CEO John Chen shifts from cutting costs to driving revenues. Jankowski thinks efforts in this area will fall short, and rather than a return to profitability, losses will widen in FY16/FY17.

"We think the success of BlackBerry’s turnaround hinges on its ability to grow its Enterprise Mobility Management (EMM) software business, where competitors include Mobile Iron, Airwatch (part of VMware), and Good," said Jankowski. "BlackBerry has set a target of $500mn in Software segment revenues for FY16(Feb), up from $250mn in FY15. We expect it to fall well short of that target and model revenues of $426mn, for two reasons. First, our surveys show very low buying intentions for BlackBerry’s EMM solution. Second, its target implies that it would leapfrog the market leaders in just one year, which we view as unlikely given the competitors’ much better traction (based on our survey)."

"Meanwhile, we forecast below-consensus Service revenues (down 47% in FY16E). While we see significant upside in Hardware revenues, those are “empty calories” as they are not profitable. Thus, we see widening losses based on the shortfall in high-margin Software and Services revenues," added the analyst.

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 $10.67 yesterday.

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