1. W Hoa's Avatar
    BlackBerry bullish
    BlackBerry shares are getting a boost Monday morning from Bernstein Research analyst Pierre Ferragu, who upped his rating on the company formerly called Research In Motion to Outperform, from Market Perform, with a new target of $22, up from $12.

    In unveiling its first phones based on the new BlackBerry 10 operating system software last week, the company also changed its name; and today has adopted a new stock ticker, BBRY.

    The new phones – the Z10 touch-screen smartphone and the Q10 with the traditional BlackBerry keyboard – have met with generally positive reviews, although the stock sold off last week on disappointment on the later-than-expected launch date for the phones in the U.S., with the Z10 to debut in March, with the Q10 delayed until April.

    But Ferragu sees reason for optimism in the early enthusiastic response the phones have received in the U.K., where they are already on sale.

    “We have grown more confident in the likely success of the Blackberry 10 launch, supported by low channel inventories, strong operator support and material pent up demand,” he writes in a research note. “Initial feedback we have received from distributors on the first days of sales is particularly positive. Investors now seemingly overlook the likely initial success of Blackberry 10. We expect new phones to swing Blackberry’s P&L into the black in [Q1 of FY 2014], and we do not expect the progressive decline in service revenue will either materially impact the company’s P&L in the short term, or in itself jeopardize the future of Blackberry.”

    Ferragu remains skeptical that the company can produce a sustainable comeback, but adds that he thinks a successful launch “will increase the option value of credible positive outcomes like a stabilized niche positioning, the development of new business models, strategic partnerships or even an acquisition.”

    The analyst says there are four reasons to think the new phones will produce better-than-expected results:

    “Blackberry has drained channel inventories over the last 12 months and is in a very strong position to start shipping its new devices,” he writes. “Channel inventories came down by over 10 million units over the last 12 months, which means most distributors and operators will take on significant initial orders.”
    “Blackberry 10 will propel up device gross margins.” He thinks the company has been selling high end devices at negative gross margins; he thinks the initial BB 10 shipments will have gross margins in the 30% range.
    The BB 10 launch is supported by most operators.
    He thinks initial corporate demand “will be strong,” adding that he has “anecdotal evidence that a number of corporate clients have been waiting for Blackberry 10 to refresh their installed base, which will support shipments meaningfully in the first months of the launch. If only 10% of Blackberry’s 30 million corporate users refresh their phone within the first 6 months of the launch, this would represent 3 million units alone.”

    BlackBerry: New Phones, New Name, New Ticker, New Fan; Bernstein Turns Bullish - Forbes
    02-04-13 09:36 AM

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