Why BlackBerry Just Got an Upgrade
NEW YORK ( TheStreet) -- BlackBerry
Oppenheimer analyst Ittai Kidron has upgraded shares of Waterloo, Ontario-based BlackBerry to "perform" from "underperform," noting that under Chen, BlackBerry is changing itself to focus more on enterprise, but the next few quarters may be rocky. "We continue to see a tough and long road ahead for BlackBerry as it pursues its enterprise-focused
transformation and we wouldn't be surprised by poor results and missed milestones," Kidron wrote in his note. "However, the initial euphoria around CEO John Chen's strategy has subsided and we believe the hard reality has sunk in with investors who are now more negatively biased for a large gap in 2014 and more realistic asset valuations. We see better SoP support around $7 from immediate value in QNX and IP and potential in messaging and enterprise. And as BlackBerry moves further away from devices and shows progress in enterprise, investors could see value in assets limiting downside."
Kidron notes BlackBerry's most valuable assets are its patents, the QNX operating system, BBM, its position in enterprise, as well as its $1.96 a share in cash. Given the recent hoopla surrounding messaging apps such as WhatsApp, which Facebook
Shares of BlackBerry were were slightly higher in pre-market trading, gaining 0.82% to $7.34.
Following the company's fiscal fourth-quarter earnings report which saw the company report a loss of 8 cents a share on $976 million in sales, compared to the loss of 67 cents a share on $1.13 billion analysts were expecting, Kidron believes reality has set in for BlackBerry. The initial euphoria surrounding Chen, who helped lead the turnaround at Sybase before selling it to SAP
Given that and several other facts, investors should begin to focus on the fact BlackBerry is no longer a device first company, though it continues to come out with new devices, such as the upcoming Z3, and the Q20 BlackBerry Classic, which is coming in November. Kidron believes that as inventory gets closer to normal and these new products are introduced, there could be a potential temporary lift to device sales.