Blackberry(BB:TSX) Morningstar maintains Neutral, $8.80 target

STA Research
by: STA Research

Morningstar maintained their Neutral rating on the software company, with a $8.80, 12 month target forecast.

Earlier this week, other notable Analysts updated their valuation models on the company:

RBC Royalbank raised  the target on Blackberry to $8.30 from $7, and maintained the Sector Perform rating on the company.

STA Research maintained the Hold rating on the stock and lowered the target to $9 from $11.50.

Canaccord Capital downgraded the stock to a Hold from a Buy rating, and cut the target to $6 from $9.

Company News:

BlackBerry Ltd. expects revenue to roughly quadruple in the next five years, with internet of things (IoT) development exceeding cybersecurity growth.

Revenues excluding contributions from licencing are expected to reach US$1.2 billion in fiscal 2027 and US$886 million in fiscal 2025, up from US$655 million last year, according to the Waterloo, Ont.-based company, which reports in US dollars.

The predicted revenues discussed during the company’s annual analyst conference represent a five-year compounded annual growth rate of 13%.

Cybersecurity is predicted to be the most expensive component, rising from $477 million in fiscal 2022 to $770 million in five years.

BlackBerry also plans to raise adjusted (non-GAAP) gross margin by at least 100 basis points yearly to fiscal 2027, invest around 30% of revenue in research and development in 2023, and generate positive adjusted profits per share and cash flow starting in 2025.

BlackBerry and Magna International Inc. also announced an agreement on several integrated advanced driving assistance systems (ADAS) solutions on Wednesday.

BlackBerry will provide engineering services as well as its QNX software to the car parts producer.

“With software now being a driving force in the automotive sector, OEMs can differentiate themselves by creating appealing solutions that are seamlessly integrated into a vehicle,” said John Wall, co-head of BlackBerry Technology Solutions, in a press statement.

“Magna’s ADAS expertise and unique ability to integrate system solutions into various vehicle applications gives us a competitive advantage,” said Sharath Reddy, senior vice-president of Magna Electronics, who also added that collaborations like this one help with the speed with which services are brought to market.


BlackBerry Limited Stock Analysis:

Based on the BlackBerry Limited stock forecasts from 8 analysts, the average analyst target price for BlackBerry Limited is CAD 7.49 over the next 12 months. BlackBerry Limited’s average analyst rating is Buy . Stock Target Advisor’s own stock analysis of BlackBerry Limited is Bearish, which is based on 3 positive signals and 9 negative signals. At the last closing, BlackBerry Limited’s stock price was CAD 7.59BlackBerry Limited’s stock price has changed by +19.53% over the past week, -7.44% over the past month and -28.19% over the last year.

What we like:

High market capitalization

This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.

Positive free cash flow

The company had positive total free cash flow in the most recent four quarters.

Superior Earnings Growth

This stock has shown top quartile earnings growth in the previous 5 years compared to its sector.

What we don’t like:

Poor risk adjusted returns

This company is delivering below median risk adjusted returns in its peers. Even if it is outperforming on returns , the returns are unpredictable. Proceed with caution.

High volatility

The total returns for this company are volatile and above median for its sector over the past 5 years. Make sure you have the risk tolerance for investing in such stock.

Below median dividend returns

The company’s average income yield over the past 5 years has been low compared to its peers. However, it is not a problem if you are not looking for income.

Overpriced compared to earnings

The stock is trading high compared to its peers on a price to earning basis and is above the sector median.

Overpriced compared to book value

The stock is trading high compared to its peers median on a price to book value basis.

Poor return on equity

The company management has delivered below median return on equity in the most recent 4 quarters compared to its peers.

Highly leveraged

The company is in the bottom half compared to its sector peers on debt to equity and is highly leveraged. However, do check the news and look at its sector and management statements. Sometimes this is high because the company is trying to grow aggressively.

Negative cashflow

The company had negative total cash flow in the most recent four quarters.

Overpriced on free cash flow basis

The stock is trading high compared to its peers on a price to free cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.




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