How many of you got excited as the market opened and news of an upgrade from Societe Generale came in to boost share prices to almost $15 a share? And then how many of you were dumbfounded when Wells Fargo’s channel checks turned a hugely positive note on BlackBerry device sales and revenue estimates brought the stock back down?
We all know that the Market is a fickle beast, she is, and what we are seeing here is hardly counter-intuitive. But I will get into this in a little bit. About two weeks ago I reported that supply chain checks have seen increases in BlackBerry device component activity. To me, this news comes as no surprise. Societe Generale ‘s Andy Perkins has upgraded shares of BlackBerry from “Sell” to “Buy” and raised his price target to $17 from $13. The reason behind this bullish shift is due to his “checks”. What Perkins found was that BlackBerry may have sold more of its newer handsets, the Z10 and the Q10, in the fiscal Q2 that ended last month than the bears on Wall Street have been anticipating.
Due to the average selling prices of the Z10 and Q10 being strategically placed at $500 and $550, respectively, as opposed to $200 for what we’ve seen the legacy devices sell for, Perkins raised his estimates to $3.7 billion in sales and a profit of 6 cents a share from what he formerly estimated at $2.7 billion and a “break-even quarter”.
This news is HUGE for BlackBerry as this affirms the efforts that the Canadian smartphone company has put forth since launching their Z10 smartphone in January.
To add onto this news, Wells Fargo has run vendor channel checks and reiterated it’s Sector Outperform rating with valuation range of $19 to $20 on the stock. Anecdotal channel checks have indicated varied demand for the Q10 across the U.S., though salespeople generally said sales were strong. This indicates a strong launch, contrary to the “soft launch” most analysts have speculated for the Q10.
Wells noted that with all things considered equal, every 100,000 BlackBerry 10-equipped units being sold equates to 1 cent in incremental EPS upside. For BlackBerry’s fiscal Q114 (May quarter), Wells is estimating unit sales of 3.5 million, revs of $3.36 billion, and EPS of 7 cents. This estimate comes close to that from Perkins and Societe Generale.
Wells also re-evaluated it’s fiscal Q214, raising estimates with the addition of 1 million Q5 units. Revenue and EPS are expected to be $3.4 billion and 15 cents respectively. This is more than double their estimates for fiscal Q114 and indicates an uptrend in sales, which should soon become apparent from supply chain checks in the coming weeks as we come closer to Q1 ’14 earnings.
Now that BlackBerry has proven it’s successes in the Market, the Street may consider taking the company seriously and may even ease the overall volatility of shares in the coming months as the shorts continue to trend downward due to increases in share prices and analyst upgrades.
Today, BlackBerry (BBRY) saw highs of $14.88 a share, but has since settled down to around where shares opened at $14.44.
Perkins also offers insight into the leveling off in internet usage in the UK by BlackBerry devices.
The downward trend indicates a loss of “market share” throughout 2012, however, it begins a slight upward trend in January 2013, around the time the Z10 device was launched. It can be deduced that the launching of BlackBerry 10 devices will, in fact, salvage the remaining market share as well as help re-establish BlackBerry as a major competitor in the mobile space – well, at least in the UK.
What are your thoughts about these developments? Do you think BlackBerry will be around long enough to relive the “glory days?”
Opinionated Aside:
The market relies on so many sources for it’s on-going activity. The fact that these upgrades came in is great news for BlackBerry, however, despite market reports of positive economic data being released yesterday, stocks across the board have seemed backtrack today. This could be due to increased amounts of volatility due to stagnating consumer data, however, it’s hard to tell. So remain positive, if shares have gained and attained gains that have been unraveled due to economic concern, they are bound to make a come back. Time will tell.