BlackBerry Ltd (NASDAQ:BBRY), (TSE:BB) is still a rather confused company. Despite having its finger in all sorts of software and security pies, the firm still hasn’t managed to figure out what it’s really good at. Its revenues are minuscule compared to the recent past, and it is still stuck in the transformation sickness period of a turnaround.
Unfortunately for those holding BlackBerry stock, Goldman Sachs has noticed all of this. The investment bank initiated coverage on the company at Sell on Monday morning. The price target comes in at $8.50.
On this morning’s pre-market, shares in the firm were falling. At time of writing they were down about 2.5 percent to $9.20.
Looking hard at BlackBerry Ltd
Gabriela Borges, who wrote the report for Goldman, says that the Waterloo, Ontario firm’s opportunity in cars is likely overplayed. BlackBerry Ltd (NASDAQ:BBRY), (TSE:BB) owns QNX an in car infotainment system. It has flirted with developing self-driving features in recent years.
Borges says that there is far too much competition in that sector, and that the Canadian smart phone maker simply doesn’t have a valuable distribution channel. She doesn’t expect there to be any material earnings from automotive for the next 1.5 years. That’s a long time period for a company that’s still relying on investor faith to keep it above water.
If Automotive isn’t ready to come through, what is BlackBerry going to be relying on? The answer is that no-one is really sure. The firm still sells smartphones, but nobody expects it to have a boom in hardware any time soon. Instead Wall Street seems to see BlackBerry as a software company.
The firm’s major enterprise software, which centers around secure communication, is just getting off the ground.
BlackBerry stock stays volatile
Overall, however, BlackBerry stock has performed very strongly recently. Shares gained more than 37 percent from the start of the year through Friday afternoon’s closing price. That rise, of course, came after years of crushing declines. Over the last five years the firm has lost about 95 percent of its value.
Those following the firm on Wall Street aren’t all that optimistic. With a median price target of around $10, it is pretty close to sell-side “fair value” right now. On earnings, it’s well accepted that massive losses have been stemmed, but not too many analysts seem to see strong growth on the way any time soon.
Consensus calls for earnings per share of 4 cents for fiscal year 2017. That will, according to consensus, rise to 7 cents for fiscal year 2018.
The recent rise appears to be mostly about the potential of substantial gains in future. That might be worth betting on for some BlackBerry fans, but it’s difficult to justify for a more risk averse trader. The Goldman Sachs report appears to have spurred a few of those marginals to run. When the market opens later on this morning we’ll be able to see just how deep that aversion really goes.