Goldman expecting another BlackBerry earnings beat

Goldman thinks BBRY revenue will be $3.13 billion, higher than the consensus of $2.85 billion

Goldman Sachs
By Chris Umiastowski on 15 Mar 2013 12:05 pm EDT
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In just under two weeks, BlackBerry will announce its Q4 earnings results.  As a reminder the company’s year end is February, so these results will include about one month of sales of the BlackBerry Z10.  But only the UK actually had the phone for the entire month.  Everyone else had a partial month (and the US carriers launch it soon).  On the call we hope to get some Z10 shipment data for the quarter.  But management should also be able to speak about March sales since the month will be practically over and they’ll want to feed the Street as much positive information as possible.  

Goldman Sachs analyst Simona Jankowski remains bullish on the stock, as reported in the Barons Blog yesterday by Tiernan Ray who always does a good job summarizing the important points in analyst reports.  Goldman has a $19 target on BBRY shares, so my guess is she’ll need to raise her target next week if the results are half decent.  Most bullish analysts prefer to raise targets than downgrade the stock as it hits their target.  

Goldman thinks BlackBerry will beat consensus estimates.  As a reminder, the consensus estimate is the average of all published analyst expectations.  These numbers are pulled together by third parties like Bloomberg and FirstCall.  Jankowski apparently trimmed her February quarter revenue and earnings estimates because she thought the Z10 would launch in the US sooner.  Either she’s slow to adjust estimates (BlackBerry said the launch would be in March back on January 30th), or the Barons blog post made a mistake.  I’m not sure since I haven’t seen the full Goldman report.

Goldman thinks BlackBerry will beat consensus estimates.

Anyway, back to the point - Goldman still thinks revenue will be $3.13 billion above the consensus estimate of $2.85 billion.  The analyst also believes earnings will beat consensus, marking the 3rd quarter in a row of BBRY beating the Street consensus.  When this happens the quantitative analysts start to notice.  There is a lot of short term focus on Wall Street, and this involves people paying close attention to earnings revisions and momentum.  If BlackBerry does beat, my guess is we’ll see the stock reach into the $20s.  But that’s a guess and I’ve been wrong MANY times before (and I guarantee I’ll be wrong again in the future - do NOT buy stock based on anything I write).

Goldman conducted a retail survey to gauge sales.  Lots of analysts do this as we’ve written about many times.  What I liked in Jankowski’s report (quoting again from the Baron’s post) is that she related the retail checks back to average selling price for handsets.  

”We conducted retail checks at nearly 40 stores in the UK, Canada, UAE, and India, to gauge the Z10 launch sales and subsequent demand. Specifically, we asked questions around popularity, sales trajectory, consumer feedback, inventory, and return rate. Based on these, we believe that most stores had a successful launch week, followed by steady demand for the device […] Z10’s pricing around the world implies an ASP of over $500, well above the November quarter’s smartphone ASP of $227 (Exhibit 1). As a result, we expect the Z10 ramp to drive a significant increase to BlackBerry’s ASPs and margins, implying upside to consensus estimates in FY4Q and to a greater extent in the May and August quarters, which include 3 months of shipments globally as opposed to 1 month of shipments in limited regions in FY4Q (Feb).”

The big point here is an ASP of $500 for the Z10 which compares to the company average of $227 last quarter.  Obviously the company average will climb based on this news, and as the Z10 (and Q10) take more share of total shipments the company ASP should rise further.  This helps gross margins and profitability, obviously.

When good news comes out, it tends to be the bullish analysts who write about it the most, while the bearish analysts may just publish email comments to their clients, and this stuff never reaches the media.  And vice-versa.  If negative news hits the wire, bears publish research notes about it and bulls try to downplay its importance in unofficial communication.  So in saying this ... if any of you happen to come across Wall Street reports from bearish analysts addressing things like the recent one million unit order, please send them to us.  I’ll read them and comment on the blog or in the forums.

73 comments

Xader

Kevin, don't encourage them... ;)

pmich

..exactly. Stop being an enabler Kevin :)

feldmen01

Way to go, Kevin! GOSH!

bounce007

Kevin, forgive them... their sarcasm meters are broken.

Zetti

Give him a Z10 Kevin!! Come on!!

bounce007

Kevin, forgive them... their sarcasm meters are broken.

Dylan Tittel

The first isn't good, but Kevin's enabling is awesome.

Mezomish

Congratulations on such a remarkable achievement! Is it your day's highlight?

Mr Gill

You guys need to stop being so rude, lets keep this a friendly community.

Mezomish

By "us guys" you mean me and Kevin? We were the only to reply on H_O_Boomaye's worthless comment...

lambique

A single, innocent comment followed by at least 10 even more worthless, sarcastic, rude comments, now truly wasting people's time...

Actually, I take that back. Your comments are the only ones that are truly rude and sarcastic.

take99

Thanks Chris, just re-mortgaged and I'm all in based on your $20 prediction. Fingers crossed! jk

FirstBerry101

I am really looking forward to the results at the end of the Quarter. Having said that I'm not sure what to expect, I have still yet to see another Z10 in the wild, and I look every time I go out. I don't have any more BBM contacts than I did on my 9900. I guess all the BB's are in Toronto...

maple_syrup

I've only seen one Z10 so far. But I've seen more way older BB than the new one. I guess the users are either unaware or they are waiting for the Q10.

knownastron

I am with you on this one... I haven't seen a Z10 other than a hand full either. Given I'm in the Prairies and most people here are behind the times when it comes to technology, fashion, etc. Let's hope they are all in Toronto!

CDM76

I hear you on that one. I'm 5 hrs north of Edmonton and up here, if you can't put a lift kit and 35"- 45" tires on it, no one is interested.

Posted via CB10

edyts

Sounds like your in the fort, i grew up there. R.I.P. Diggers lol.

rigwrecker

LOL! Yeah, I hear ya, I don't like to say this out loud, but I grew up there too. I don't get to see too many Z10's

rigwrecker

LMAO! I used to live in Gregoire Park. growing up....

Rootbrian

You don't have any BBM contacts? Hell, Why don't you add some then? It's what I did and now I have many. Make new friends on here man, it's what we do. :)

thelink74

Im so excited to see BlackBerry get back on top in the Good old USA..

QuIcKsIlV3r

first for what? 13 minutes late to claim first for responding to the article!! LOL

2001bmw330xi

just in time for CB HQ to make it's NYC debut!

slade632

Crazy I wonder how accurate their retail checks are. Either way higher expectations tend to lower the stock price... I hope BB beats these revenue estimates.

What I wonder is how much the cashflow will go down after this quarter of heavy marketing

k3vtruj

I will definitely be paying attention on the 28th. Things I will be specifically be looking for are; how many units they sold in February (if over 1M then good news), the release date of the Q10, and how much cash they have on hand (over 2B is good)

k8bushlover

I'm reading a comma into: "Goldman still thinks revenue will be $3.13 billion ^comma here^ above the consensus estimate of $2.85 billion." (Otherwise that would make Goldman's estimate $5.98 billion.)

CDM76

Good catch. But I read it with comma and didn't notice there wasn't one.

Posted via CB10

QuIcKsIlV3r

I really hope that Goldman is right, or at the very least, somewhere in the middle of the 2.85 billion and 3.13 Billion. Would love to see BlackBerry come back with vengeance

thevizer

noticed that too... makes a big difference!

luv4berrycrack

This is almost as exciting as waiting for the z10 us launch. Can't wait. The 1 million order should be in that too right. BBRY will soon be leading pioneers in smart phones once again.

Jimberry Storm

There are many things I don't understand (women ) but right at the top of the list is 1st.
Anyway good post Chris thanks

GeneralHerzog

Given that I'm reading several not so raving reviews about the new S4 and more media outlets starting to not be so kind to Apple, anything postive will jump the stock (or so I really hope)

GV2012

Hi Chris,
Your articles are well thought out and clear.
Any chance you can do a short one (no pun intended ) on the short interest and how it may affect the stock price. I try to explain this to my friends who think they understand the stock market but I'm not very good at it. Looking at the days to cover its hard to imagine everything is on the up and up. Having been a owner of FFH I am pretty well schooled to know, re shorting, it many times is not.

zander2652

He wrote an article last month about shorting stocks. Try searching for it, it might answer your questions. :)

GV2012

I don't have the questions. I thought others might find his explanations interesting though I didn't realize he had written an article on subject. :)

pmich

What's the consensus on Z10s sold in Q4 (month of Feb). 600,000? 1M? i'd like to know what number analysts are expecting

IJKBB10

at the very least I really hope they beat the expectations to slam down all those analysts and people who were saying that the new BB10 would be DOA. Even better if they really blow away the expectations on Wall street :) Im just so tired of hearing all the BB bashing and any excuse to write negative articles about BB.

musical1806

Problem is that, to the best of my knowledge, no expectations have been given. BB say they sold 100m handsets some "analyst" will say "BB sales were announced today well short of the 150m that was expected"........ BB are smart not to give any figures yet but it can work against as well as for you.

PostMortem

Very informative Chris, thanks. Would not have thought about the ASPs that way, but makes complete sense.
Kevin, how much longer on the broken podcast promises (couldn't help it).

MidnightSociety

Seems like the shorts are getting squeezed today and starting to leave! This is good news.

w0lfgang

This is why im long 400 shares....i also recall posting back in november if anyone else had noticed on BB10 reviews that 2-3 out of 10 comments came from Android/iOS users saying they couldnt wait to switch.
Thats when i bought.....*pat self on back* :-)

jojo beaconsfield

the sun is shining on bb, they deserve a big hug,they hv built a team that looks like the old bruins when Bobby Orr was playing ,u had Phil,Wayne ,Gerry,and the list goes on .same goes for bb , i am sure u can name many stars on bb,s winning team.problem is, we really can,t compare thorstien to don. ha ha.

jrohland

Another great to-the-point-post from Chris "The Oracle" Umiastowski.

BB10dude

Oh I'm buying!

Posted via CB10

timmy t

"...Anyway, back to the point - Goldman still thinks revenue will be $3.13 billion above the consensus estimate of $2.85 billion..."

Either that is a lot above consensus estimate or you have to improve your punctuation.

bbfanboi

CrackBerry folks: Please, please, please! keep latest articles ON TOP in blog view. You can feature some you want to bring attention to, but if latest articles aren't on top, I'm missing them. Thanks!

timmy t

Analysts will still complain that they can't or won't explain how they will make up for decreased service revenue and will drive the stock down.

W Hoa

Chris, it will be interesting to see if BBRY breaks out the Z10 numbers. Normally they don't highlight any particular device and we will be left with gross margins and ASP to find an indication of Z10 sales.

krackerjack69

I tend to believe these heavy weights of wall st. more than the no name analysts from small outlets. Goldman is part of the elite mover shakers and played a big part of the financial debacle in the US. They know what they are doing and talking about. They have the tools and resources to get a better picture of a company than most. They have been neutral of bullish on BB for a while and let the bears do the yapping and talking.
My humble two cents :D

jason9900

Chris you said earnings will be 3.13 above consensus of 2.85. So are you implying the revenue will be 3.13 billion or 5.98 billion?

erodenero

always a pleasure umi, well written.

SMCNI1968

The Goldman analyst carries weight in my book as she was negative and right on the way down and has changed her mind as the story has changed. Same with the Bernstein analyst.

Posted via CB10

kfh227

My startegy is to wait till march 22 or 25. Pray that the stock is below $15.

If so, I am buying some call options that expire on March 28 or April 5.

On a big beat or good sell through info, this stock has the potential to skyrocket.

adrenaline_x

Your tie in the picture means you are for real.. I will buy 1 million shares.

ayandakeith

Don't get me wrong - I love all the postings from Kevin, Blaize and all the big ballers at Crackberry but I'm emotionally invested in BBRY's success and I have every intention in investing financially (once I pay off my Z10). Therefore, I always read the articles Chris delivers. Thank you for schooling us on the BBRY business and finance. You are the voice of reason.

jic999

Chris do not worry, we will not buy BBRY on any of your recommendations, like Nov. 2013 BBRY is at $7 and then trades into $18. So today BBRY is at $15, and I am looking at the April 20th weekly options with a strike of $15 , $16 and $17. And yes not on your recommendations of course !

Chris Umiastowski

LOL :)  

You must mean this article where I didn't officially recommend the stock either.  November 2012.

CDM76

A beat for Q4 is news? I thought it was a given considering that most analysts predicted a loss or break even. In Q3 BlackBerry was above the predictions so Q4 is pretty much guaranteed to be at analysts predictions.

Posted via CB10

CDM76

The real question is by how much BlackBerry will be at the predictions.... I not expecting too much there. But a lot more analysts are paying attention again now. :)

Ps: Don't be surprised to see a sell off during or shortly after the ER. People will sell to get profits then buy lower to make more when goes up again.

Posted via CB10

David Hoang

My earnings' projection for BlackBerry.

Last quarter's earnings report:

Revenues Percentage. Dollar
Hardwares 60%. 1.6362 B
Service fee. 36% 0.98172 B
Others 4% 0.10908 B
Total. 100%. 2.727 B

Inventory at recoverable value was 457 million-assumed all will be gone by this quarter- 457 million revenue in the book.

Last quarter Mr Heins said service fee revenue structure will be different for z10. He also mentioned that there will be continuing pressure on current service fee revenue. However I think don't all the service fee revenue will be gone. I will assume service fee will drop by 20%- that still leave about 785 million.

I am writing off the 4% other revenue to be conservative.

In total we have an estimated/projected revenue of 1.242 BlackBerry still need 1.7-1.8 billion in revenue to beat analysts' projection.

Every Z10 sold will generate 500 Gross revenue. So everyone can do your own projection.

Ps: Sorry if this dont make any sense. Please don't take it seriously. I am not doing this for fun. Go BlackBerry 10!

Posted via CB10

Rootbrian

Wwell written, well said. Go go blackberry!!

digitalsurfboard

i think the big question is how many BBOS7 devices where sold in Q4?

in the UK, Canada and US sales of those devices must have plummeted. everyone would have been waiting for the new BB10 devices.

the key is emerging markets that will have continued to sell OS7 devices. was BB able to keep moving units at a similar pace as q3?

how will the media react? does the NA media still expect BB to die? or are they on the "BB is back" bandwagon?

lorax1284

"Goldman still thinks revenue will be $3.13 billion above the consensus estimate of $2.85 billion."

Oh what a difference a comma makes: could be interpreted as revenue of "$5.98 billion", but I know you mean

"Goldman still thinks revenue will be $3.13 billion, above the consensus estimate of $2.85 billion."

techfan49

Hi. How much is the brut profit Blackberry makes per phone?
How many z10's would Blackberry have to sell to break even?

savingblackberry

Those of us who believed Blackberry, Lazaridis and Balsillie when they said things were good and $6 or $7 in EPS and bought stock at 60 range are eating crow while Balsillie and Lazaridis get $7 million bonus. What a screwed up system.

rigwrecker

was wondering myself(comma) if it was $3.13B or the $2.85B + $3.13B.... interesting. Vauge (comma) typical (comma) not of Chris though (comma) of the analysts (period)... (lol)