BlackBerry Ltd BB impressed investors with its earnings report, but some Wall Street analysts aren't ready to turn too bullish just yet.
The Analyst
BMO Capital Markets' Tim Long maintains a Market Perform rating on BlackBerry's stock with a price target boosted from $10 to $12.
The Thesis
BlackBerry's "strong" earnings report highlighted by better than expected revenue in both the software and legacy business and a margin and EPS beat, Long said in a note. The company encouragingly highlighted several key wins in the software business. At the same time, growth within the software business has proven to be "disappointing" and there is unlikely to be any near-term catalyst to "spur the business."
See Also: BlackBerry Delivers Q3 Beat: 'Our Momentum Continues'
Investors may want to consider staying on the sidelines on BlackBerry's stock as the "inflection point for growth" has yet to be made apparent, Long said. Overall, investors have reason to be "skeptical" on the handset software licensing business where revenue may "find a hard time" exceeded contractually requirement minimums and the Enterprise segment seems "stagnant." Accordingly, this places all of the pressure for BlackBerry to outperform in the automotive and asset tracking opportunities but through now any signs of revenue inflection has not yet been made apparent.
A $12 price target is based on a sum-of-the-parts analysis using a 5x multiple on the software business which is in-line with the company's comparable peers.
Price Action
Shares of BlackBerry were trading lower by around 2 percent Thursday morning.
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