Shares of BlackBerry (BBRY) are up 80 cents, almost 6%, at $15.25 following a report of an unexpected profit last Thursday, for the company’s fiscal Q4 ending February, and comments by the company that it is pleased with initial sales of its Z10 handset running the new BB10 operating system.
There were several notes today following the long weekend, and most involving some adjustment to estimates. There is still a fairly wide disparity among analysts in terms of revenue and loss estimates for this fiscal year ending next February. Some of the themes are a continuation of those raised in initial reports published Thursday afternoon: rising estimates, a more profitable outlook, and uncertainty about subscriber numbers.
Wells Fargo‘s Maynard Um reiterates an Outperform rating, and a $19 to $20 “valuation range,” writing “Gross margins were the biggest surprise in the quarter, beating even the most optimistic expectations, though we see this now as largely the cat out of the bag.
“We believe the implied revenue as well as breakeven EPS guidance for FQ1 could be conservative (we forecast $0.07 EPS),” writes Um, “And believe one key to watch will be the timing of new carrier launches, particularly for the Q10 BlackBerry with keyboard (early vs. late May).”
Passi cuts his revenue estimate from $12.7 billion to $12.52 billion for this fiscal year, but raises his EPS estimate to a 7-cent loss from a prior estimates of a 22-cent loss. The new estimates reflect “a conservative outlook on
BlackBerry 10 (BB10) units, declining hardware ASPs/margins through the fiscal year, and acceleration in subscriber churn,” he writes.
UBS‘s Amitabh Passi reiterates a Neutral rating, and a $13 price target, after cutting his 2014 estimate to $14.56 billion in revenue from a prior $14.94 billion, but raising his EPS estimate to 61 cents from 29 cents. He raised his BB10 unit shipments estimate to 17 million this year from a prior 16.7 million, and now sees operating margin of 2.9% versus a prior 0.8% prediction.
Passi has skepticism positive trends can be maintained:
We question the sustainability of BB10 sell through (2/3-3/4 of sell-in) and margins over the next 2-3 quarters as competitive pressures and the introduction of lower-cost handsets will put downward pressure on margins. Service ARPU trends were confounding. We are not convinced yet BB10 will be a viable platform and remain on the sidelines with a cautious stance and a $13 target.
Michael Genovese of MKM Partners reiterates a Sell rating and a $10 price target, while raising his fiscal 2014 estimate to $12.31 billion from $11.8 billion, and cutting his loss estimate to 14 cents per share this year from a prior 60-cent loss estimate.
Genovese focuses on his estimate that subscriber churn was higher than the 3 million headline decline in subscriber count that BlackBerry reported:
6mn users left the BlackBerry platform in the quarter. BlackBerry reported its first quarterly subscriber decline ever in 3QFY13 when total subs dipped to 79mn from 80mn. The decline accelerated in 4QFY13 with total subs at 76mn, driven by losses in North America and EMEA slightly offset by gains in APAC and LatAm. We calculate that approximately 6mn subscribers switched away from BlackBerry in the quarter compared to roughly 3mn switching to BlackBerry. Assuming a 66.6%/33.3% replacement/new sub split for the over 7mn BB7/6/5 units that sold through suggests the company added 2.5mn BB7/6/5 subs. If we take management�s comments at face value that two-thirds to three-quarters of the 1mn BB10 units shipped in 4QFY13 have sold
through and over half of these user come from other platforms, then BlackBerry 10 attracted about 400,000 additional new subs. The net sub math for the quarter ends up as 2.5mn BB7/6/5 subs and 0.4mn BB10 subs added compared to approximately 6mn BB7/6/5 subs lost.
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