BlackBerry is not even worth $4 billion, says Kulbinder Garcha
BlackBerry Ltd (NASDAQ:BBRY) is trading down since the open, following some comments from Credit Suisse analyst Kulbinder Garcha. The stock is currently trading around 1% lower than yesterday, and Mr. Garcha has said that the valuation of the company is far lower than what it is assumed. The analyst dubbed BlackBerry as just another “software company”, which is definitely not worth $4 billion. Blackberry is currently making some major changes to the way it operates and is shifting focus towards software.
Blackberry has little to offer to its shareholders and investors as the company continues to struggle to find its place in the industry. It is now seeking for an exit from the hardware industry and has started to transform into a full blow services company. Mr. Garcha believes that the company will completely shut off its hardware business and the revenue from the segment will disappear in its entirety.
Furthermore, the analyst’s expectation of $850 million software revenue in the year FY19 is quite generous as he models for growth of about 13% and 12% during the next two years, which, at the given time, will be quite a feat to achieve. Apart from hardware and other structural issues, there lies significant risk even in the company’s mainstream software business. The analyst remains skeptical regarding the quality of software and the execution and believes that the company will need to put in some real effort in order to grow.
The long term EPS base case of the company is 24 cents and the multiple for the stock is 18 times the P/E. The analyst reaffirmed the underperform rating with a price target of $6. The analyst ratings for Blackberry are one buy, two outperform, 14 hold and six underperform. The stock currently trades at a price of $7.54 and has lost 1.05% since the open of the market.