Wells Fargo and Credit Suisse both issued coverage for BlackBerry Ltd. (NASDAQ: BBRY) after the struggling smartphone player reported earnings last Friday. Many investors remain confused about BlackBerry’s turnaround hopes. It appears that analysts are struggling to find equilibrium as well. Wells Fargo maintained a Market Perform rating, while Credit Suisse issued a rating of Underperform.
Wells Fargo stated that BlackBerry is getting ready for a revenue ramp in its software business as its EZ Pass Program comes to a close at the end of January 2015. BlackBerry gave guidance that software revenues would double. However, Wells Fargo would argue that though this is possible, there are far too many unknowns at the moment.
The Wells Fargo estimates for earnings per share (EPS) in fiscal years 2015 and 2016 were adjusted to -$0.18 and -$0.02, respectively, from the previous levels of -$0.58 and -$0.27. The valuation range for the share price is $9.50 to $10.50 — right in line with the current BlackBerry share price.
Credit Suisse estimates for EPS in the fiscal years 2015 and 2016 were adjusted to -$0.50 and -$0.64, from the previous -$0.49 and -$0.42. The target price was valued at $6, implying that this stock is grossly overvalued as now.
Credit Suisse gave its valuation of BlackBerry:
Given the inherent challenges in turning around the services stream, as well as subscale loss making hardware business, we believe it would be best for the company to break up. Assuming shutting down the hardware business by the end of FY15 and winding down services business by the end of FY16, we arrive at NAV of $3.1 billion ($6 per share), which suggests an approximate 45% downside from the current market price.
BlackBerry shares were trading down four cents at $10.22 in midday trading on Monday. The stock has a consensus price target of $8.72, a 52-week trading range of $5.44 to $11.65 and a market cap of $5.4 billion.
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