BlackBerry has price target slashed at RBC

Although he sees some potential for green shoots, particularly with its IoT business, RBC analyst Paul Treiber says there currently isn’t a whole lot to encourage investors about BlackBerry (BlackBerry Stock Quote, Chart, News, Analysts, Financials NYSE:BB)

As reported by the Globe and Mail, Treiber February 14 cut his price target on BB stock from $4.00 to $3.00 while maintaining his “Sector Perform” rating.

The analyst says it’s still hard for investors to pull their eyes away from the slow-motion train wreck that BlackBerry has become.

“We believe investor sentiment is likely to remain low, considering the magnitude of historical revenue declines and lack of profitability at Cybersecurity, reduced sentiment for auto-tech, and guided negative FCF for the next 4 quarters,” he said.

Treiber broke down the numbers behind his price target.

“Our model calls for total costs (COGS + opex) to decline $113-million between FY23 and FY25,” he wrote. “While BlackBerry’s $150-million target is above our estimates, we believe near-term investor visibility is low, and we are leaving our FY24/FY25 revenue and adj. operating margin outlook unchanged, considering: 1) BlackBerry has only identified $55-million cost savings out of the $100-million improvement; 2) a portion of the targeted net profit improvement appears dependent on a rebound in IoT revenue; and 3) Cybersecurity revenue may remain a headwind. BlackBerry anticipates negative cashflow for the next 4 quarters while it restructures and only expects to reach positive operating cashflow by Q4/FY25. The timing of positive cashflow is later than our expectations. As a result, we are reducing our FY25 free cashflow estimate from $19-million to negative $44-million.”

The analyst says it has become hard to see a path back for the once great Canadian company.

“In light of the challenges facing BlackBerry’s Cybersecurity business, we believe investor visibility to the stabilization in BlackBerry’s revenue and path to sustained profitability remains low,” he noted.