So they should probably stop talking.
BlackBerry took a 5% hit today simply because of more analyst ignorance.
Uninformed analysts simply stating an OPINION has powerful effects on the investment sheep. I have a different opinion, but nobody listens to me.
“[BlackBerry] will be unable to gain relevancy in enterprise mobile management software market and will continue to lose enterprise subscribers,” said analysts at Morgan Stanley. “Pressure will continue to mount on hardware platforms in the form of both lower pricing and lengthening life cycles, with value creation opportunities primarily in software.”
Analysts have become Fortune Tellers apparently, rather than analysts. And who is it? Our old friend James Faucett.
Regarding devices, he simply doesn’t think they can sell as many as hoped:
Part of BBRY’s plan to get to EPS and cash flow breakeven results during FY16 is through improving profitability of handset products substantially. We estimate that the company has been selling handsets at around breakeven (or even negative GM). While we expect that BBRY may be able to increase its GM on new handsets to the mid-20’s range, we do not expect that BBRY will hit its needed level of 10M units in FY16 to get to OM breakeven.
Regarding software, the company’s expectations for how many paying enterprise subscribers it can have are unrealistic, he writes:
We believe that the market has largely valued the company based on the assumption that BlackBerry will generate an incremental $250mm in software revenue and an incremental $100mm in messaging revenue during FY16, consistent with the targets set out by BlackBerry CEO John Chen (from roughly $0 today). That kind of ramp implies that the company will exit FY16 (approximately 15 months from today) with new software and messaging revenue on an $800M-$1B annualized run rate. In order to hit that level, if the company hits its recently stated objective of collecting $9/month from enterprise subscribers for secure mobile management and roughly $12/month from messaging, we estimate that the company will need to exit FY16 with roughly 8-10M enterprise subs and another 1M-2M messaging subs. Just on the enterprise subs, that 8-10M subs implies that BlackBerry will not only successfully retain (or recapture) roughly its entire existing enterprise subscriber base—plus more—it will also convince that subscriber base to increase by roughly 3x how much it is paying BlackBerry today.
So what does this all mean?
EXCELLENT BUY OPPORTUNITY TODAY!