BlackBerry Ltd (BBRY) Hardware Weak Despite Android Rumors

blackberry ltd (BBRY) OS

For BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) no respite in the hardware sales appears in sight with Canaccord Genuity expecting weak smartphone sale to continue. Citing its wireless survey, the sell-side firm slashed the FY16 hardware units and revenue estimates for the firm.

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More licensing deals needed to hit target

The research firm also noted that BlackBerry recognizes hardware revenue only after the device is sold to customer, and not when it is shipped. They note that the impressive software and technology licensing revenues in the Q1 were mainly due to two one-time payments.

As a result, the analysts are lowering the FY16 technology licensing estimates for the firm. A few weeks back, BlackBerry slashed its FY16 software-related target, which also includes licensing revenue, from $600m to $500m due to lower Messenger expectations.

Considering the firms growth expectations for EMM in FY16, the analysts note that the firm faces a hard task of selling the EMM subscriptions and growing the sales of the value added services. The firm will have to enter more technology licensing deals to achieve its FY16 sales target, noted Canaccord .

Declining high-margin services business along with weak hardware sales will continue to impact the earnings for the firm in FY16 and also in FY17, said analysts. Sharing more detail on the phone sales, the analysts note that the sales for Classic has been stable, but that is offset by the weak sales of Passport and other BB10 phones, while for Leap there is no clear data available.

BlackBerry estimates slashed

In addition, lower FY16 estimates are also based on the fact that BlackBerry will be coming up with its next-gen hardware in 2016, suggesting that the hardware sales for this year will be from the current line-up, which have not been very popular among the users.

Owing to lower hardware and software-related estimates, the analysts have slashed the FY16 EPS estimates from $(0.20) to $(0.38). Canaccord analysts maintained a Hold rating on the firm with a price target of $8.

Many analysts have come out with their verdict on the stock in the recent weeks. In a note on Wednesday, RBC Capital lowered the price target from $11.00 to $10.00, and gave a Sector Perform rating. Wells Fargo & Co. gave a Market Perform rating on the firm, in a note on July 3rd. Also, Macquarie slashed the target on the stock from $8.50 to $8.00, and set an Underperform rating, in a note on July 2nd. Presently, BlackBerry has an average rating of Hold and a consensus price target of $9.76.

On Wednesday, the stock closed down 3.75% at $7.69, and year to date the stock is down over 30%.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.


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