Analyst downgrades BlackBerry but raises target price
EMILY JACKSON
FINANCIAL POST
Raymond James analyst Steven Li downgraded BlackBerry to market perform from outperform given the limited return to target, according to a Monday note to clients.
But Li simultaneously increased the target price to $11 US from $9.50 US, reflecting in part a larger-than-expected award from a binding arbitration with Qualcomm. This “significant cash boost” of $940 million US, which will be paid on or before Wednesday, will further improve BlackBerry’s balance sheet, he wrote.
“We believe BlackBerry could redeploy some of that cash into potential M&A to accelerate its strategy,” Li wrote.
Since Li last upgraded the stock in August 2016, its shares are up more than 40 per cent and are now trading in-line with a group of comparable software companies, he noted.
He now sees the path to $1 billion in software revenue a “little clearer,” he wrote, although he added it “still requires strong execution.”
His assumptions on major software components such as the QNX in-car systems are more conservative than that of management’s. While BlackBerry currently claims to have more than half the market share for in-car operating systems, Li predicts it will decline to about 35 per cent given competition from Android.
Still, QNX plays a big role in BlackBerry’s new story as a software company, Li noted.
“Anything that impacts sentiment around QNX could be a potential catalyst,” he wrote.
Investors should also keep an eye on sales of the new BlackBerry KeyOne, which TCL is starting to sell this month (BlackBerry will get royalties per device sold), and trucking software Radar. CEO John Chen has hinted there are large trucking companies testing the software, Li wrote.