Morgan Stanley analyst James Faucette has upgraded his rating on BlackBerry stock on the strength of the company’s cash reserves and ability to further cut costs.
Faucette raised his rating on the stock to “equal weight” from “underweight,” in a note to clients Tuesday. BlackBerry rose 5.6 per cent to US$7.69 climbed to US$7.74 earlier, the highest since May 15.
BlackBerry has fallen 34 per cent this year through Monday as some analysts and investors have questioned whether Chief Executive Officer John Chen can turn around the company and reach the goal of doubling software revenue to $500 million by March 2016.
“While there is no evidence of a fundamental business turnaround, BlackBerry has flexibility with cash and opportunity for op-ex cuts that create value,†Faucette said in the note.
“The company still has significant opportunity to add to that cash balance through headcount reductions or other reallocation of resources.â€Â
Faucette still doubts BlackBerry will hit FY16 software and messaging revenue goals of $500M and $100M. However, he thinks reaching $400M in software revenue is possible, and that this would translate into a $3-$3.50/share valuation for BlackBerry’s software ops at 4x-5x sales. The cash balance is worth another $3.50-$3.75/share.
BlackBerry stock is currently sitting at $7.68 at the time of publishing.
