What’s Driving Our $11 Price Estimate For BlackBerry?
BlackBerry (NYSE:BB) has been seeing its business stabilize as growth in the software business offsets declines in the smartphone and Service Access Fee space. In this note, we take a look at the company’s outlook and some of the trends driving our $11 price estimate.
We have also created an interactive dashboard analysis outlining our forecasts. You can modify the graphs with blue dots to arrive at your own estimates.
Blackberry’s Software segment is likely to be the biggest driver of its performance going forward. The bread-and-butter Enterprise Mobility Management business has been seeing reasonably strong traction from government agencies and customers in regulated industries, and the shift towards a subscription-based model should also ensure some revenue stability, as roughly 75% of software revenues are recurring in nature currently. BlackBerry has also been betting on emerging areas such as autonomous vehicles and the Internet of Things, leveraging its QNX software platform. While these bets could prove to be a long-term growth driver for the company, we do not see significant upside in the interim (related:Why BlackBerry’s Autonomous Driving Deal With Baidu Is Significant). BlackBerry has also been looking to better monetize its patents. Late last year, the company entered into an agreement with a unit of patent licensing company Marconi Group, to sub-license its patents to global smartphone vendors.
- A 3x Expected Rise In Mounjaro Sales Is Likely To Drive Eli Lilly’s Q1
- What Should You Do With Danaher Stock At $250 After Q1 Beat?
- Will A Macau Recovery Drive MGM Stock Higher Following Q1 Results?
- Lockheed Martin Stock Will Likely Remain In Focus After A Stellar Q1
- Up 17% YTD, What To Expect From eBay Q1 Results?
- Rising 21% This Year, What Lies Ahead For Exxon Stock Following Q1 Earnings?
Blackberry’s Service Access Fee revenues are trending towards zero, as customers abandon their legacy BlackBerry devices. While we expect BlackBerry’s software and services gross margins to improve in the long run, they could face some pressure in the near term as revenue declines in the SAF business more than offset the decrease in costs. Blackberry’s smartphone operations will also play a diminishing role in its revenue mix going forward following its decision to switch to a licensing model about two years ago. While handset revenues will trend significantly lower, margins should improve, as incremental costs associated with licensing are likely fairly low.
We have a $11 price estimate for BlackBerry which is roughly in line with the current market price.
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams