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    BlackBerry 10: Never have investors and analysts been so far apart | FP Tech Desk | Financial Post

    BlackBerry’s six-month stock rally, fuelled by speculation that a new smartphone lineup can turn its fortunes around, has created the largest gap between investor optimism and analyst skepticism of any major company in Canada.

    The shares Monday closed in Toronto at $14.51, 21% above the average price target of $11.97, according to data compiled by Bloomberg. That’s a higher premium than any other stock on the Standard & Poor’s/TSX Composite Index. The next closest company is Canadian Pacific Railway Ltd., the railway operator backed by hedge fund activist Bill Ackman, which is trading just 8% above its average target.

    Only six out of 45 analysts who track the company rated it a buy ahead of its quarterly results March 28, when BlackBerry will offer the first glimpse into sales data for the new phones. Analysts who were bullish on the stock before, only to see it get battered for years, are reluctant to start lifting their ratings and price targets now, said Richard Moroney, chief investment officer at Horizon Investment Services.

    “When the stock was at $6, people reset their price targets,” he said. Moroney, who has owned the shares in the past, said he’s avoiding them now because of the volatility. “Once bit, twice shy.”

    Z10 Phone

    The first BlackBerry 10 model, the Z10, went on sale in the U.K. on Jan. 31, before gradually rolling out to other countries. The company is counting on the devices to keep its customers loyal and restore its status as a contender to Apple Inc.’s iPhone and Google Inc.’s Android platform. Apple and Android, which is used by Samsung Electronics Co., together accounted for 91% of global smartphone sales in the fourth quarter, according to IDC. BlackBerry’s share, meanwhile, dropped to 3.2%.

    Rebecca Freiburger, a spokeswoman for Waterloo, Ontario- based BlackBerry, declined to comment.

    Most analysts are skeptical that the company can claw back market share. Simona Jankowski, a Goldman Sachs Group Inc. analyst in San Francisco, said in a report Monday that the BlackBerry 10 lineup only has a 20% chance of success, down from an earlier estimate of 30%.

    Many investors have ignored the pessimism over the past six months, helping drive up the stock 132% in Toronto trading. Still, the shares remain about 90% below their 2008 peak.

    Uncertain Value

    The gap between the current stock price and analysts’ targets “shows you how volatile it’s been and how uncertain the value of the company is in people’s minds,” said Horizon’s Moroney, who is based in Hammond, Indiana.

    Even Morgan Stanley analyst Ehud Gelblum, who upgraded his rating on BlackBerry to a buy last week on an improved outlook for profitability, stressed that he didn’t see the company making a meaningful recovery in the U.S.

    “Our more bullish stance is not based on a resurgence in share in the U.S.,” he said at the time.

    The latest earnings report won’t reflect U.S. sales, since the Z10 was only released in that market last week, missing the March 2 end date for the company’s fiscal fourth quarter.

    While the earnings will include sales data from Canada, the U.K. and other countries, the phone’s staggered global rollout has made it difficult for analysts to produce consistent estimates. Projections for BlackBerry’s total revenue in the quarter range from as little as $2.41 billion to as much as $3.42 billion, according to data compiled by Bloomberg.

    Sales Decline

    The average estimate comes in at $2.86 billion. While that would represent a decline of 32% from a year earlier, it’s a smaller drop than the company posted three months earlier. BlackBerry, known as Research In Motion Ltd. until a name change in January, is expected to post a loss of 30 cents, excluding some items, based on the average estimate.

    Early indications suggest that the Z10 isn’t selling well in the U.S. In her report Monday, Goldman Sachs’s Jankowski cited “tepid” demand for the phone and a lack of marketing support from carrier AT&T Inc. Jim Suva, an analyst at Citigroup Inc., raised concerns about bad product placement and the lack of training of AT&T staff in demonstrating the Z10’s features.

    The touch-screen phone is built on a new operating system that presents a learning curve to the BlackBerry faithful, many of whom have cherished the company’s physical keyboards. It also dispenses with the home button familiar to iPhone and Galaxy users, relying instead on gesture-driven navigation to switch between applications. Those features — as well as a virtual keyboard that learns where you strike the keys — have been praised by critics.

    Underlying Value

    If the phone does catch on, it would help prolong the stock rally. And even if it doesn’t, BlackBerry has valuable assets that would help prop up the shares, said Mark Sue, an analyst at RBC Capital Markets in Toronto. The stock is still trading below book value — the net value of its patents, property and other assets — and BlackBerry has almost 80 million relatively loyal customers, he said.

    “A new product cycle, a sticky base of 79 million users and a robust smartphone market are attractive to investors,” said Sue, who rates BlackBerry the equivalent of a hold.

    The one thing you can be sure of is a major stock move after the earnings are released, he said. The shares have risen or fallen 16% on average the last three times BlackBerry has delivered its results.

    “Expect volatility,” he said.
    Shanerredflag likes this.
    03-26-13 12:31 PM

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