BlackBerry getting some love from SocGen and Wells Fargo

By Chris Umiastowski on 14 Jun 2013 04:38 pm EDT
2
loading...
0
loading...
39
loading...

After drifting lower for most of this week, BlackBerry shares got a nice boost in the last two trading days thanks to two analyst upgrades. For those keeping track, the stock is now hovering around $14.50, which is about a buck higher than Wednesday’s close.

French investment bank Société Générale upgraded BlackBerry from a sell to a buy rating on Thursday morning. The analyst at SocGen believes BlackBerry sold about 4 million Z10 devices in the quarter than just ended, which would be an increase from only one million last quarter. 

One million to 4 million sounds excellent, and remember that the Z10 only hit the market at the end of January, giving BlackBerry one month to generate sales in the last set of quarterly numbers. The numbers should obviously climb given the full quarter of availability and the global launch of the device. But at the same time momentum may have cooled because of the release of other new all-touch phones on the market like the Galaxy S4 and HTC One.

SocGen also thinks BlackBerry will have sold 1 million Q10 devices in the quarter, which also reflects much less than a full quarter of availability. SocGen’s channel checks are the reason they upgraded the stock. 

Separately, this morning, Wells Fargo also upgraded the stock based on their checks which suggest a strong Q10 launch in the US market. They peg total BlackBerry 10 device sales at 3.5 million for the quarter, which is lower than SocGen’s 5 million estimate. Wells Fargo thinks BlackBerry shares are worth $19-20. I should also point out that their analyst, Maynard Um, has a good reputation. I don’t know him personally but during my years in the industry the smart people I looked up to only had great things to say about him and his ability to dig into stocks.

It’s probably worth pointing out that these two banks are large institutions. This doesn’t make them better or worse, just less likely to be influenced by any single client (or small group of clients) who may have an agenda other than formulating a correct investment opinion. 

If SocGen is right, and BlackBerry ships 4 million Z10s and 1 million Q10s, I think it would be a tremendously positive sign. What happens if BlackBerry can ship 4 million Z10s and and 4 million Q10s next quarter (after the Q fully ramps)?  What happens when the Q5 hits emerging markets? We could be looking at a very rapid acceleration of BlackBerry 10 devices... devices that we know have very good gross margin levels compared to BBOS hardware. 

As much as I’d like to see SocGen’s estimates prove to be correct, they seem a bit aggressive to me. On Wednesday of this week BlueFin Research Partners put out a note with a fairly negative tone. BlueFin says that BlackBerry just cut Z10 production by another 20%. But what they don’t really talk about is the Q10, which I think is offsetting all of the Z10 slowdown and then some. 

BlackBerry will report its Q1 results for the quarter ended June 1st in two weeks, on Friday June 28th before the market opens.  It’s not going to be a clean quarter. We’re in a heavy transition period here, and we will continue to be for the next few quarters.  As BlackBerry 10 volumes ramp up we’ll see improved gross margin on hardware and a strong offsetting drop in BIS service revenue. This will lead to continued conflicting views on Wall Street as the bulls focus on new hardware growth and the bears point to the weakening service business and a lack of confidence in long term sustainability of the hardware model. 

Since the Q10 has launched I think it’s become increasingly clear that there is heavy demand for physical QWERTY devices from BlackBerry customers. I think BlackBerry’s #1 focus needs to be migrating its customer base to BlackBerry 10. If those users prefer physical keyboards, so be it. It’s far more important to get all of your customers onto a modern BlackBerry experience because they’re the source of much word of mouth advertising and hands-on peer to peer marketing. If BlackBerry can’t get its core users to upgrade, they are in huge trouble. That’s why I’m so pleased to see strong Q10 demand and the upcoming Q5 launch. 

In the next week or so we should see several more analyst notes. This is the season for quarterly preview notes.  As I review them I’ll post my thoughts here on CrackBerry.

Topics: BBRY Editorial

51 comments

buckwylder

Awesome!!!!!!!!!! I think I'm gonna buy a bike today now.

Posted via CB10 on a Q10 or a Z10, either way it's golden.

Driftdreams

Here we go! Finally!... I hope Wall Street stops this bearish attitude towards BlackBerry. Clearly, the stock is going to rise up as more and more stores offer the new devices. The problem is getting these Brokers to stop shorting this stock. BlackBerry is not the bump and dump app they keep treating it like. IF they knew anything, they'd follow these steps.

sreidenb

So Wells Fargo should make a native app for BB10 then. I'm sick of my android port not letting me deposit checks.

Posted via CB10

AfroZepher

looking to get more details on the enterprise front. . .

tatail

At every point the shares went down I bought as much as I could and this time around I didn't have much to buy so I guess that was my last chance to buy..

As I see it BBRY will keep rising from this point forth..

elicash

Z10 cuts are worrisome. Flaming out pretty quickly. Z10 has dropped below Bold 9900 sales at Carphone Warehouse. Sub losses probably continue.

Posted via CB10

elicash

Does anyone have any real insight as to why Rob Orr is gone from UK team?

Posted via CB10

thedustytaco

probably health issues. he prob wants to spend his last days with full joy before going to the bigger place

Posted via CB10

dbarz

believe it or not, I think it may be easier for IOS and Adroid users to jump on the bandwagon than it is for old blackberry users.

In my experience when I show off my shinny Z10 to blackberry owners most of them like it but are skeptical due to their experience with the older OS. They are afraid that the old problems of freezing and sticking may still be present and simply cannot fathom a blackberry that just does not freeze.

On the other hand IOS and Android users are over the hype and are willing to try Blackberry10 simply because they have never personally had any bad experiences with blackberry in the past.

This may be the reason why there are so many reports that a high percentage of sales are due to IOS and Android users switching. I may be wrong but in MY experience of showing off my Z10 I've have more positive responses from non blackberry users.

dbarz
BBM Channel - Trini Tingz
C00040f7E

rarch1

I've had the same experience. A lot of Old BlackBerry using still want to try a new OS because of their experience using the old BlackBerry OS. They think that BlackBerry 10 is just a paint job.

Posted via CB10

bldshd

You got to let them know that it is a new OS... the newest actually... yea it has some features from the old BlackBerry OS (which are mostly greatly improved) but it's all built on QNX which makes it the newest mobile OS... IOS is now the oldest, I guess followed by Android, then windows phone

Posted via CB10

LyBerry

I haven't had this experience. All reactions are positive and more so from people who are current BlackBerry owners, followed by former BlackBerry owners, and then those who never owned one before. A couple of current BlackBerry owners upgraded to the Z10, thankful they spoke to me before switching to a Galaxy or iPhone.

Posted via CB10

John Gee

I would love to be a BB10 booster, but my Z10 reboots randomly. So I tell people I love the BB10 UI, but I don't go so far as to recommend it. I can't since I looks like 30% of us who get to live with random reboots. Hopefully, AT&T pushes out an update with the fix sometime soon. Then I can bring out the pompoms.

Posted via CB10

Omnitech

The love I could use from Wells Fargo is a BB10 banking app.

It's time for one of the big three to break the ice and I think WF is a great choice to do that.

Acumenight

Hey Chris,

Great write up, thanks you. Can you comment on how SocGen came to an EPS $0.07 after adding a billion in revenues.

Thanks again!

Chris Umiastowski

I don't know. Seemed a bit strange to me also. I don't have the full note on that one, only the same media summaries from Bloomberg etc that everyone can read.

Posted via CB10

fedakd

Adding $1B in revenues and increasing EPS from $0.00 to $0.07 isn't logical, not in the slightest.

adonesc

Sad to see that any positive or negative news about a company as innovative as BlackBerry is being once again decided by financial analysts whose worth for me lies somewhere between toe cheese and pond scum...there is no way a financial analyst can qualify or quantify the worth of a physical product, in this case a phone, the Z10 in my case. As a user and a consumer I can determine the worth of the product I choose to buy and invest money in, from its usage and it's performance.

A financial analyst, economist or whatever high -minded titles we choose to bestow on what are basically gamblers, operates under the umbrella of the market which is an artificial construct given shape and form by us, our minds and intelects. A market exists because we choose to believe that. The market does not exist apart and aside from us in an a priori form.

Yet in in this topsy-turvy world of ours,we have chosen to imbue the market and it's representatives with all this authority. I think that is wrong. We as consumers should have final say as to what constitutes a success or a failure. I'm not here to defend BlackBerry, but as a consumer and user of their products I appreciate their ingenuity and craft.

Yet some guy sitting at some desk in some skyscraper in Manhattan can simply dismiss consumers all over the world by printing a few words in a paper, blogging on the net or giving an interview on air and saying that BlackBerry sucks...and sending the company in a tailspin.

You might not think that that has real life consequences until you realize that the company might hay to let go some employees as an after effect of all that negativity.

BlackBerry itself is not blameless by any means, year living on its laurels and over inflated hubris, cost them dearly, by falling behind in research and innovation. Yet now they have come back with a new, good, solid product and they are being drowned by a bunch of f analysts who for whatever vested interest have a hard-on from wanting to see them fail

Don't forget, behind all these statistics and figures people's livelihoods are at stake...

Posted via CB10

Hidjk

Two thumbs up...

Posted via CB10 on Blackberry Z10!

IslanderTnT

Very well said!

Not sure if you heard that the Canadian Gov is setting up a special unit to investigate stock manipulation. When a few of these so called analysis end up behind bars then things will begin to change. Until then, the legitimate investor is at a serious disadvantage!

Posted via CB10

chrisstlaurent

We need Alex to comment, this article is too positive!

Posted via CB10

Hidjk

Chris and Alex are both good/interesting. Alex can get a bit rude at times though...
Both are smart in their own way... :o)

Posted via CB10 on Blackberry Z10!

zander2652

IMHO, I think Alex should contribute something positive to crackberry instead of being rude to people. I don't think he's helping anyone in the crackberry community with his attitude. On the other hand, I'm sure a lot of us appreciate Umi's insightful articles. Thanks for taking the time to write out your thoughts, Chris. Very much appreciated.

BerryWizard

Great article christ.
You have a typo
On the 2nd paragraph
7th line

than just ended should be
"That just ended "

Please keep posting your articles on the stock. I stopped reading analyst articles ( help me sleep at night) but still need to stay informed about it.

Posted via CB10

zander2652

you have a typo on your first line, 3rd word. Christ was crucified about 2,000 years ago so I don't think he wrote this article. lol

Hidjk

John 1

1 In the beginning was the Word, and the Word was with God, and the Word was God.
2 He was with God in the beginning.
3 Through him all things were made; without him nothing was made that has been made.
4 In him was life, and that life was the light of men.
5 The light shines in the darkness, but the darkness has not understood it.
6 There came a man who was sent from God; his name was John.
7 He came as a witness to testify concerning that light, so that through him all men might believe.
8 He himself was not the light; he came only as a witness to the light.
9 The true light that gives light to every man was coming into the world.
10 He was in the world, and though the world was made through him, the world did not recognize him.
11 He came to that which was his own, but his own did not receive him.
12 Yet to all who received him, to those who believed in his name, he gave the right to become children of God--
13 children born not of natural descent, nor of human decision or a husband's will, but born of God.
14 The Word became flesh and made his dwelling among us. We have seen his glory, the glory of the One and Only, who came from the Father, full of grace and truth.
15 John testifies concerning him. He cries out, saying, "This was he of whom I said, 'He who comes after me has surpassed me because he was before me.'"
16 From the fullness of his grace we have all received one blessing after another.
17 For the law was given through Moses; grace and truth came through Jesus Christ.

Posted via CB10 on Blackberry Z10!

Chicago777Guy

Keep the coming...just to add Goldman Sachs a acquisition value of 28 $...M but really if we are looking for analyst with reputation then we don't need to go further than the ultimate analyst...Prem Watsa With a target of 40 $...go BBRY!!!!

Posted via CB10

TDSWIM

The worst thing for blackberry that I've seen personally in the US is the actual stores that sell the phones. I was upgrading my Bold 9930 to a Q10 at Verizon and another woman with a BlackBerry came in wanting to upgrade also. The saleswoman immediately recommended the iPhone because of "overall better options." Being long the stock, this ticked me off but I just kept my mouth shut. This probably happens prettymuch everywhere. Even with a good product, the salespeople are going to drag things down and ensure that BlackBerry gets off to a slower start here in the US. Anyone else had similar experiences?

Good article as always. Keep it up.

Posted via CB10

Hidjk

You should have said something...
The sales lady obviously does not know anything and needed some guidance in a friendly manor of course. :o)

Posted via CB10 on Blackberry Z10!

Mr.Willie

Do you really consider a 2 x 4 upside the head friendly ? ;)

Hidjk

No that would be a wee bit extreme. Lol
Besides 2 by 4's are meant for building up not tearing down... :o)

Posted via CB10 on Blackberry Z10!

FrankDLR1972

When I came in for my upgrade and said I wanted the Z10, the salesman paused and looked at me and asked me if I was sure. I said of course. And he asked again if I was really sure. He went on to say they had only sold 4 since it launched on Verizon. It was May 17 and he said ppl were bringing them back a day or two later because they couldn't get used to the OS. I came back the next day cuz my wife's upgrade was due and she was already convinced after seeing me and my first few hrs with the phone. She wanted it too (she was on the fence cuz every BB she's had was buggy, slow & froze a lot). Just a week layer and she said she couldn't understand how ppl had such a hard time with BB10. That it wasn't THAT complicated. She seems happy with the Z10 and I LOVE mine. Later in the year I want to also get a Q10 cuz i miss my 9930 keyboard. BlackBerry will be ok. I believe it!

Posted via CB10

TDSWIM

@FrankDLR1972 my saleswoman asked if I was sure also, but I probably seemed confident enough in my decision that she didn't try to pull the same stunt the other saleswoman did and try to get me an iPhone or Android.

@Hidjk I probably should have said something but just didn't have it in me. It was irritating that she didn't even want to get the display out and show the woman the new Q10 even though she specifically came in asking for it. The attitude of the salespeople make me more worried about BBRYs prospects in the US than them messing something up with the device. I love my new Q10, but it will take too long before the salespeople come around.

br14

"The sales lady obviously does not know anything"

Except that she has been told to sell iPhones for some reason only her company knows (like they have loads sitting in warehouses tying up capital, or because they get a higher markup, or because they sell more data).

In a multi-billion dollar market surely you don't expect the players to be open and honest and give the customer what is best for them (if the customer doesn't already know that is).

Caveat emptor and all that.

MozThaGreat

So I talked two of my friends into really looking at the Z10 when they upgrade. One left with a iPhone 5 and the other an HTC One. I asked them what happened cause they had glowing reviews after playing with the Z10 and basically they got bullied into other devices. I wanted to be mad but they love their new phones so oh well.

dhildreth09

Just need a wells Fargo app

Posted via CB10

SuperionMaximus

Z10 sales slowing worries me a little because there does not seem to be another all touch screen phone in the pipeline until Q4 and from the sounds of it, it will tank hard with it's target demographic.

BlackBerry needs to figure out the touchscreen market FAST.

They need to retain their loyal users and the Q10 and Q5 will help, but that's a small segment of the market and they need those touchscreen phones to draw in new business.

I expect them to announce somewhere between 4-5 million BB10 devices shipped in Q2 though. But they need to be able to ramp up the volume throughout the year.

web99

That's where BB10 marketing needs to kick in on two fronts. They should be specially tailored adds for BlackBerry legacy users encouraging them to switch to the Z10 and Q10 , showing them the benefits of switching over.

There should be more adds just highlighting the many positive features of the Z10 and Q10.

Posted via CB10 from my spectacular Z10

jic999

Chris, the shorts are focusing on the sale thru sales #'s of Z10 and Q10.
So it sounds like the sale thru numbers are good and a squeeze can materialize ! What about thé cash numbers, is this the quarter where the cash number drops or Will it increase with these surprise sales numbers ?

Posted via CB10

Chris Umiastowski

Good question. I'll have to check what the CFO said in the last call but I think they expect to burn through quite a bit of cash in their global launch. That's what I expect. Marketing, inventory build etc.

Posted via CB10

blargy

Rumor, rumor, rumor, rumor, rumor...

I can't trust anything any of these guys say! They contradict each other to such a degree that it's maddening!

I'll wait for the actual numbers to come out. I feel pretty secure with my 82 shares though.

...Of course, even with real numbers, analysts still seem to fabricate half of their "findings" and come to 50 different conclusions.

- I did this with my Z10! -

blargy

Wouldn't it just be great if BlackBerry announced some where around 10-20 million BB10 devices though?

I'd be grinning for days...

- I did this with my Z10! -

Tilewa

Great! Can WellsFargo develop a native app? Would be a lot easier than this mobile site I have to use!

Posted via CB10

Dan Lloyd

Worth pointing out that SocGen were adamant bears on the name for a long time. No small feat to turn a bearish analyst...let's hope they hit the numbers.

Posted via CB10

jimmyt1

Maybe this is a new approach by the "stock manipulators". Inflate estimates to a level that won't be reached, giving the opportunity to sell short at much higher prices...

Though i'm poking fun at the general investment public mindset, there will someone out there who believes this.

Posted via CB10

jojo beaconsfield

Initially BB,had planned production of 1.5 million Z's per month ,so this is just about right!!

br14

Soc Gen numbers look over the top to me. One million Z10's sold in the first quarter with pent up demand. Hardly seems likely sales would continue at that level. Even taking into account it was launched in the US during the quarter.

I'd say half those sales is more reasonable, with possibly a lift from the Q10 sales (which has to have higher margins the price they're charging here in Canada - $880).

So around 3-4 million total BB10 sounds fair. Which is ok. Increasing focus on BB10 should lead to better revenues and profits though given the vastly improved margins over BB7 devices. So Q1 should look ok and I guess be reasonably profitable.

And the leaked specs for the Aristo last year suggest the real break through for BlackBerry could well be when that phone is released - I assume later this year based on current progress (we've had one phone every couple of months).

With the Z10, Q10, Q5 and the Aristo, BlackBerry will have a full stable of high quality high performance devices. Add in revenues from BES10 sales - including license fees for every BYOD used with BES10, and the future looks bright. But I think we're waiting until later in the year Q2 or Q3 results for any real jump in stock price.

TDSWIM

I agree with you. Stock isn't likely going anywhere in the near future. I'm long the stock, but I think it will take another quarter or two before things start to turn up. Hopefully Aristo starts grabbing some better numbers than the Z10 has so far.

fedakd

less than 1 month of Z10 sales in 3 countries = 1M in the first month. They weren't selling to the USA or any other countries at that time. I don't think you're comparisons are all that accurate here.

5M BB10 in Q1.

bigr3n

Hi all, just wanted to add my two cents. I noticed that after about a week after I purchased my z10 (in full and unlocked it) on T Mobile, that I went inside the tmo store to deal with a problem that I had. And the section for the new z10 at the time was so small you would've missed it. I honestly believe that BlackBerry was just really deep in a hole and is trying to dig themselves out of it, a lot of people are just stuck on ios & droidphones. I also took a trip down to Miami from Fort Lauderdale yesterday & was in miami at a local flea market there, I saw a vendor with all types of phone accessories so I was curious to see what did he have in Stock as far as any cases. So he asks me is that an iPhone and I said no its the new BlackBerry z10 and passed it to him to look and feel it. He then tells me it's the first time he's seen the phone. BlackBerry needs to step up as far as advertising those commercials that I have seen so far here in the usa just plainly suck. If iphone can advertise a simple commercial about how their phone is used by people who just listen to music then I know for sure BlackBerry can do better than that for an add. Loving my z10 and apps by the way.

Posted via CB10

Shanerredflag

Thanks Chris.

Posted via CB10