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BlackBerry Ltd (BBRY) Launches First Android Phone; Analysts Stay on Sidelines

By Howard Kim 

On Sep 28, BlackBerry Ltd (NASDAQ:BBRY) showcased its first Android phone, Priv, with a hope to revive its hardware division. In the second quarter, smartphone shipments for the company stood at 800,000 units; much lower than the average analyst forecast of 1.2 million. However, the company is optimistic that it will meet its target of $500 million in software revenues for fiscal 2016. In light of these announcements, two analysts following the company weighed in.

Amitabh Passi from UBS maintained a Neutral rating on the company and lowered his price target for the stock to $7.50 from $10. He agrees with the company’s CEO, John Chen, that Blackberry’s future success depends on its ability to build a complete software portfolio. However, according to The Fly, he has expressed doubts about the hardware business stabilizing before the software business gains any momentum.

Mark Sue from RBC Capital Markets responded to Blackberry’s claims about its new phone being the most secure Android phone in the market; saying he doesn’t believe Priv will match the security of BB10 devices. Sue adds, however, “The Android-based devices takes the company another step closer towards a software-only business.” In his research note, he said the shift to Android will be beneficial as the company can bring new devices to market quickly.

Sue is positive about the transition of the company from perpetual revenues to subscription revenues; he feels while the transition causes a short-term drag in revenues, it improves long-term visibility. For now, he reiterated a Hold rating on BBRY with an $8 price target.

The ratings of Passi and Sue are in-line with the majority of the 13 analysts on TipRanks who have recently rated BlackBerry. In the last 3 months, 2 analysts have been bearish on the company while 11 are neutral. The average 12-month price target for the stock, based on views of all 13 analysts, is $7.36, a roughly 17% upside from present levels.