Don't Get Too Excited About This BlackBerry Upgrade

Shares of smartphone-maker BlackBerry (NASDAQ: BBRY  ) rose 6.3% Thursday after Societe Generale analyst Andy Perkins raised the firm's rating on the stock from sell, all the way up to buy. At the same time, Perkins set a $17 price target on shares of Blackberry, up from his previous target of $13, and representing a nearly 18% potential gain from Thursday's closing price at $14.42 per share.

So what made made him change his mind?

In short, Perkins writes, their "channel checks have come up with some surprisingly strong numbers for RIM's unit sales for" the current fiscal quarter. More specifically, he thinks BlackBerry might be able to sell more than four million of their new Z10 smartphones during this quarter alone.

At the same time, Perkins also stated they would be "surprised" if the QWERTY keyboard-sporting Q10 smartphone sold more than one million units -- but that's understandable given the fact the Q10 has only been available for just over a month in a few countries, and was only released in the massive United States market last week.

In total, Societe Generale now believes BlackBerry could sell more than five million Blackberry 10 handsets for the quarter, which is above consensus estimates calling for sales of between 3 million and 4 million BB10-enabled units.

The catch?
Curiously enough, Perkins also noted that sell side analyst guestimates are unsurprisingly all over the map given the difficulty in nailing down exact unit sales numbers, with revenue "estimates published over the last month ranging from $3.1 billion to $4.1 billion, and operating results from a loss of $100 million to a profit of $344 million." Remember, BlackBerry management told investors during its latest quarterly earnings report in March to expect the company to "approach breakeven financial results" for the current quarter.

What's more, while he admitted they can't find any "direct support of [their] forecast of a large rise in sales of new portfolio products," they were optimistic. BlackBerry's previous painful losses in the mobile Internet market seem to have "stabilized and even risen slightly" in the United Kingdom -- that is, at least, according to recent data from Global Stats' StatCounter webpage.

And remember, the United Kingdom is an important market for BlackBerry, especially considering it was the first market to receive both the Z10 and the Q10 smartphones in late January and April, respectively. 

When we zoom out a bit from a laser focus on the UK, however, Perkins' also reminded us of the same data that fellow Fool Evan Niu recently referenced from Kantar Worldwide, which indicated last week that BlackBerry's most formidable competitors are only extending their lead in the massive United States market.

Specifically, while Google's Android browser still holds a commanding lead, with 51.7% of the domestic market, Apple's (NASDAQ: AAPL  )  iOS managed to gain 2.3% share in the United States to secure 41.4%, while Microsoft's mobile OS also gained an impressive 1.8% over the past year, and now holds a 5.6% share.

Meanwhile, as Evan pointed out last week, those gains by Apple and Microsoft came largely at the expense of -- you guessed it -- BlackBerry, whose share of the U.S. smartphone market has fallen from 5.3%, to a dismal 0.7% over the last year.

A sliver of hope
This, of course, doesn't necessarily rule out the possibility that BlackBerry might be able to pick up the slack in other markets, especially considering the company last month unveiled a lower-cost BB10-enabled smartphone, dubbed the "Q5," aimed at developing markets like India and China.

Remember, however, as I wrote in February, those territories already come with built-in competitors in the in the form of lower-cost Chinese phone makers like Huawei and ZTE, both of which rocketed last year past the likes of HTC, Nokia, and Blackberry to secure the third and fifth spots, respectively, in the top five global vendors in terms of fourth-quarter smartphone unit shipments.

Unsurprisingly, IDC data from last quarter showed BlackBerry fared no better, as Samsung and Apple remained firmly on top by shipping 32.7%, and 17.3%, of all smartphone units, while LG, Huawei, and ZTE took the third, fourth, and fifth positions in the list by shipping 10.3 million, 9.9 million, and 9.1 million smartphones, respectively.

What's more, recent rumors also suggest Apple could be planning a more affordable iPhone of its own going forward, which could itself easily turn the world of smartphones on its head by capturing the very developing markets that Blackberry needs in order to succeed.

Grasping at straws
As for now, BlackBerry has remained cash-flow positive, and does have some time to right its ship, thanks largely to its impressive absence of debt, and $2.9 billion in cash and investments at the end of last quarter. This is good for 39% of BlackBerry's current total market capitalization. 

But, while this particular upgrade may hold an element of truth over the short term with regard to BlackBerry's stabilizing U.K. market share, I think it's a stretch to say that it's enough for the company to successfully maintain a steadily profitable business over the long haul.

As a result, I'm afraid that the risk of BlackBerry continuing to get squeezed out of the mix in today's increasingly crowded global market simply makes this a bet I'm not yet willing to take.

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Read/Post Comments (23) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 14, 2013, at 6:39 PM, sonbuster wrote:

    what about wells fargo's estimates today?

    Wells Fargo boosted his FY14 earnings estimate sharply from a loss of $0.07/share to a gain of $0.32. http://stks.co/tGhk

  • Report this Comment On June 14, 2013, at 7:19 PM, jbernardca wrote:

    U.S. market use to be 30% of the smart phone market, it got reduced to 25% and getting closer to 20%. Don't know where you think it's a massive market when big companies in Europe and Asia have zero sales in the states and prosper very well. Fact is, more and more the United States is becoming less important to the world.

  • Report this Comment On June 14, 2013, at 8:04 PM, fjfisher601 wrote:

    This Guy is a fool! There is no better Business use phone nor one more secure than Blackberry. Not to mention they don't track everything you do and use it to sell to advertisers. There are 77mm users and that will grow . More phones are on the way and the QNX O/S brings in revenue from other sources and uses. They will be here long after the Android fad wares off . The true picture will emerge in Sept after a full quarter of Q10 sales, and the 5 series. I'm long and will stay that way.

  • Report this Comment On June 14, 2013, at 8:24 PM, Jowza wrote:

    Good article. I see the Rimm shills are out in force with their insults. Sad. I have not see a single one of the new Rimm phones anywhere. This is Palm the sequel

  • Report this Comment On June 14, 2013, at 8:43 PM, jbernardca wrote:

    Jowza:

    Putting Palm as a comparison shows you don't do much lecture. No comparison at all except your comment about insults. ;)

  • Report this Comment On June 14, 2013, at 9:54 PM, Rockthebest wrote:

    Boo, Boo, Boo

    However I still sold my Apple, Blackberry and Nokia shares. Think bigger, buy google.!

    Listen to the Fools advice and do the opposite, you will succeed.

  • Report this Comment On June 14, 2013, at 10:03 PM, HelpIsHere wrote:

    You tried to put forward a sound argument but it failed badly. Research, and more research! Keep trying and you will get there one day!

  • Report this Comment On June 14, 2013, at 11:42 PM, k1moops wrote:

    BBRY is trying too hard to sell itself. Giving away BBM, opening up BES 10 to iOS and Android and allowing email exchanges between them. Why? I believe BBRY had been preaching too much of its old selling points such as security, BBM, and its many gestures based gimmicks and little things like multitasking and the hub, etc. BBRY has to think big without being too big, and stop doing things that do not translate into profits for BBRY and its partners. In order to do that, BBRY has to go back to the drawing board and reinvent itself. What makes money for BBRY? Who can help BBRY make money? Is BB10 good enough to make money for BBRY? And BBRY has to do these money making analysis and planning in a hurry. The window of opportunity is small, and BBRY must solicit the helps of other Canadian companies and Canadians. Right now, I do not see much success in that from BBRY, the stock is failing and things must be done quickly to turn the tide.

  • Report this Comment On June 14, 2013, at 11:53 PM, k1moops wrote:

    What I propose is for BBRY to partner with other Canadian electronics companies in making potential best sellers. Instead of doing the same thing it has been doing for the past 30 years, namely making communications devices and secure networking, why not partner with other Canadian firms and come up with very practical products and services for sale?

  • Report this Comment On June 15, 2013, at 12:22 AM, vijitc wrote:

    Blackberry is hardly grasping at straws. They seem to know their market and they appear totally focused on patiently executing a long term plan to that market. If you want to get against that it is up to you. So far, I am liking everything they have been doing since the new management team was formed. Furthermore the board appears to have similar faith.

  • Report this Comment On June 15, 2013, at 12:48 AM, BlackberryIsKing wrote:

    BBRY is the future. Long BBRY is for smart people. Shorting BBRY is for total morons, like the author. Loving it when they lose money on the short. Also loving seeing AAPL drop. Soon will be below $400 again, then $300. BBRY is the future, no doubt at all.

  • Report this Comment On June 15, 2013, at 12:55 AM, eidsonb wrote:

    These always are recycled when good news comes out...

  • Report this Comment On June 15, 2013, at 7:17 AM, Oril wrote:

    Massive US market! Too funny. Oh and I love the way you reference another ignorant fool to back up your stupidity.

    What was it that lead the upgrade the other day, it was not an American company so it does not count for the fools stick with your made in China apple crap while the rest of the world moves on.

    Blackberry's new products are made in Canada and Mexico. Ever hear of an organization called NAFTA?

    There is one more partner in there somewhere, its time they woke up.

  • Report this Comment On June 15, 2013, at 8:44 AM, mxh070 wrote:

    Berry is doing fine, I could never see what's all the panic for as change takes time the new product has been on the market for roughly 5 months.

    In other news Samsung has cut S4 orders by 30% already due to weak demand for the device world wide. Thanks JPMORGAN for that little bit of info.

  • Report this Comment On June 15, 2013, at 9:09 AM, etgh wrote:

    More short-seller bought media....yawn.

    I'll be glad when all these low options contracts expire and these guys take their serious lumps and move on to another victim.

    The scary thing about all this how far their collective greed influences the media and the markets. It's getting more and more difficult to get a real honest perspective.

  • Report this Comment On June 15, 2013, at 9:10 AM, CZZZZZZ wrote:

    The Fool has been bashing Blackberry since last Fall when it was $6.50...and was supporting Apple since it was $750. This biased trash would have cost investors severely if they listen to this idiot news outlet.

    Well now BB10, Z10, Q10 and BES10 are out and competing with 6 year old dinosaurs...you're only going to look even more foolish if you contain this biased stance.

  • Report this Comment On June 15, 2013, at 11:43 AM, harlequin65 wrote:

    @km1moops...Gesture gimmicks?? You mean like the ones Apple is copying for their "new" OS?

    Security an old selling point? Seems like a good selling point to me especially with the current news about the NSA.

    Multitasking is a little thing? Only because the iphone can only do 1 thing at a time i guess.

  • Report this Comment On June 15, 2013, at 11:47 AM, magnaman1969 wrote:

    You will look like a real FOOL June 28.

    BlackBerry will smash thus ER.

    As for Kantar...it's based on surveys..not sales and BlackBerry publicly disputed the UK numbers they published.

    This article us a joke.

    Long investors will be rewarded..shorts will be punished.

  • Report this Comment On June 15, 2013, at 11:51 AM, Chippy55 wrote:

    Once again the Fool confirms it title as the fool of the internet. Two words: Short Squeeze. Two more: Shaddup fool!

    The fool is too busy with the constant bashing of Blackberry to notice he news lately and here's the synopsis: Google, Yahoo, Apple, Facebook, Microsoft, NSA/Prism scandal, spying on Americans, hacking, and what words are missing from all that front page news? Canadian firm Blackberry.

    Perhaps the fool is too concerned with those Apple shares they obviously own or the shorted Blackberry shares they have to have noticed the DOW was off over 100 points and almost down 200 points for part of the day while BBRY closed up. Apple continues it slide from the lofty $705 height it achieved on nothing but high expectations of... drumroll please: New Icons. Wow. That essentially is the two words Tim Cook announced at the WDC conference last week.

    Students at Georgia Tech demonstrated how they can hack into ANY Apple device through the charger. The fool of course shrugged off this security disaster because they still have shares in AAPL and memories of $705. Sweet dreams Apple fanboys as you deal with this nightmare.

    Yinz can either buy one share of Apple for $430, or get 30 shares of Blackberry at $14.42. WHICH ONE IS GOING TO DOUBLE SOONER?

  • Report this Comment On June 15, 2013, at 11:53 AM, magnaman1969 wrote:

    Apple makes all their product in China with child labour and hides all the profit offshore,avoiding taxes like a real " american" company.

    Samsung is a Korean company who doesn't build a thing in North America.

    BlackBerry builds it's products in Canada and Mexico.

    BlackBerry doesn't give the US govt access to your messages.

    Open your eyes.

  • Report this Comment On June 16, 2013, at 10:47 AM, BlackberryIsKing wrote:

    @Jowza: If you want to see the new BB10 phones, you actually need to leave your mother's basement. BBRY is the future. The stock will be over $30 in a year. Z10 and Q10 are the best of the best. The iPhoney is a dog.

  • Report this Comment On June 16, 2013, at 4:30 PM, Quarterbeck wrote:

    BESTBUY in Vancouver has given Blackberry a full table to display their phones. Microsoft phones are hard to find: two phones on separate tables. I asked the salesman why. "Microsoft phones are not selling. Blackberry is number two after Samsung"he said.. Photos of displays on request: ray444@live.ca

    BB is just peeking through the door in the US but in Canada it's hot. Check out Bestbuy, Rogers, Telus and Bell (the big 3 media/phone companies)on the Canadian web sites.

  • Report this Comment On June 17, 2013, at 12:18 PM, greenember wrote:

    Another person who didn't actually read the Kantar results. It was a survey of consumer sales during a period where the new BB phones were available for 1/3 of the time that the other phones were. Key words to pay attention to are 'consumer', 'survey', and 'sales'. Right in the report they say it is NOT marketshare, but you report it here as if it was. If you can't bother to fact check before writing an article, I can't be bothered to take you seriously....

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