BlackBerry’s risk-to-reward is compelling, says Cormark’s Tse

BlackBerry’s (TSX:BB) Q1, 2015 results, due on Thursday, will likely see another quarter of declining revenues, says Cormark analyst Richard Tse. But the company remains attractive at current levels because of the underlying value of its assets, he adds.

BlackBerry’s first quarter follows on Q4, 2014 in which it lost $423-million on revenue of $976-million. The results were a mixed bag as both the company’s loss and its topline were smaller than expected.

Tse says he expects the quarter to be slightly worse than consensus, with a loss of $0.27 on revenue of $972-million, versus the street’s expectation of $0.25 loss on $979-million. The Cormark analyst says his eyes won’t be on the continued decline of revenue-generating subscribers, but rather on the progress of BS12 and the company’s efforts in the enterprise market. He says initiatives such as its recent joint venture with EnStream, a mobile payments initiative owned by Bell, Rogers, and Telus “are the right ones in light of the company’s technology portfolio and obvious challenges in the consumer market,” but cautions that it’s still too early to judge if these efforts will be successful.

In assigning a value to BlackBerry, Tse says he looks at what he thinks its underlying components are worth. His methodology assumes a net asset value of $4-billion, plus another $1-billion for its BBM messaging, MDM and potential IOT platforms and another $500-million to $1-billion for potential tax refunds.

In a research update to clients this morning, Tse maintained his (US) $11.50 target and Speculative Buy recommendation on BlackBerry.

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