BlackBerry (BBRY) Results to Be 'Dismal' But Traders May React Positive Again to Chen - MKM
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Rating Summary:
4 Buy, 31 Hold, 12 Sell
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Today's Overall Ratings:
Up: 4 | Down: 8 | New: 1
Rating Summary:
4 Buy, 31 Hold, 12 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 4 | Down: 8 | New: 1
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MKM Partners analyst Michael Genovese reiterated a Neutral rating and $10 fair value target on BlackBerry (NASDAQ: BBRY) into fourth quarter earnings before the market open tomorrow.
Genovese said, "We remain highly skeptical of BlackBerry's ability to navigate a successful turn-around. However, from a short-term trading perspective, investors may react positively to another John Chen-led conference call."
Genovese believes investors have a lot of faith in the new CEO. "Many investors are now interested in BlackBerry due to John Chen's track record of turn-arounds, including his impressive work at Sybase. BBRY rallied sharply during Mr. Chen's remarks on the 3QFY14 conference call, and the stock is up more than 30% over the past three months compared to the S&P up less than 2% over the same period. We were impressed with the new CEO's frank and open discussion style on the last call, but we continue to see more challenges than opportunities for the company going forward."
The analyst expects results, however, to be "dismal." they are modeling 4QFY14 revenues to decline 58% y/y and 7% y/y to $1.12bn, and we see potential downside to this near-consensus estimate. He also notes cash bury will be in focus, although it will be much less than the prior quarter. They expect cash consumption in the February quarter to be less than $500mn and for this metric to continue to improve over the next several quarters.
Genovese said BlackBerry is no WhatsApp. "BlackBerry's CEO recently stated that BBM is not currently being shopped, signifying to us that no interested buyers have come forward. We are also skeptical of the company's new plan to monetize BBM via sponsored channels, money transfer services and the sale of virtual goods. We see very little global demand for BBRY hardware. QNX is getting into more automobiles but the Software revenue opportunity is relatively low. Perhaps most importantly, the Enterprise MDM space continues to become more and more crowded (over 130 competitors) despite the overall small addressable market opportunity (under $2bn this year)."
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 $9.16 yesterday.
Genovese said, "We remain highly skeptical of BlackBerry's ability to navigate a successful turn-around. However, from a short-term trading perspective, investors may react positively to another John Chen-led conference call."
Genovese believes investors have a lot of faith in the new CEO. "Many investors are now interested in BlackBerry due to John Chen's track record of turn-arounds, including his impressive work at Sybase. BBRY rallied sharply during Mr. Chen's remarks on the 3QFY14 conference call, and the stock is up more than 30% over the past three months compared to the S&P up less than 2% over the same period. We were impressed with the new CEO's frank and open discussion style on the last call, but we continue to see more challenges than opportunities for the company going forward."
The analyst expects results, however, to be "dismal." they are modeling 4QFY14 revenues to decline 58% y/y and 7% y/y to $1.12bn, and we see potential downside to this near-consensus estimate. He also notes cash bury will be in focus, although it will be much less than the prior quarter. They expect cash consumption in the February quarter to be less than $500mn and for this metric to continue to improve over the next several quarters.
Genovese said BlackBerry is no WhatsApp. "BlackBerry's CEO recently stated that BBM is not currently being shopped, signifying to us that no interested buyers have come forward. We are also skeptical of the company's new plan to monetize BBM via sponsored channels, money transfer services and the sale of virtual goods. We see very little global demand for BBRY hardware. QNX is getting into more automobiles but the Software revenue opportunity is relatively low. Perhaps most importantly, the Enterprise MDM space continues to become more and more crowded (over 130 competitors) despite the overall small addressable market opportunity (under $2bn this year)."
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 $9.16 yesterday.
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