Bullish on the Q10

So far this week we’ve seen some negative comments out of the usual bearish Wall Street analysts.  If you follow the stock, you know who these guys are. They tend to avoid any kind of balanced analysis, always hammering on whatever negative points they can find.

Wall Street analysts are not typically experts on how to gather supply chain data, nor are they experts in how to measure sell through at retail locations. There are experts out there who gather such data for a living, and they sell it to people willing to pay for it. So whenever I see Wall Street doing store checks and the information conflicts with dozens upon dozens of anecdotal reports, I get suspicious. And when it conflicts with many public statements by company executives, you know someone is wrong.

Bluefin is a non-traditional equity research firm that specializes in doing the kinds of channel checks that investors are interested in. They probably don’t have nearly as detailed financial models, they won’t necessarily know as much about the company’s long term strategic plans, and in the case of BlackBerry they’re unlikely to talk much about things like BES 10 deployment, for example. But they usually have better knowledge than most of Wall Street when it comes to supply chain stuff.

This means BlackBerry underestimated demand for the Q10, and now makes three times as many Q10 devices as Z10.

Bluefin put out a report yesterday that essentially tells their clients that BlackBerry is set to deliver more than 20 million BlackBerry 10 devices this fiscal year, and that would be significantly higher than most analyst estimates. 

They suggest that Z10 sales have slowed since the launch, which seems normal considering demand is always greatest in the first few weeks, and we’ve also seen the Galaxy S4 and HTC One launches since then.  But they also tell us that carrier inventory is certainly not an issue - carriers are holding next to nothing.

Furthermore, Bluefin confirms what we wrote about earlier this week.  Specifically, that Q10 production has now shifted to a 3:1 ratio of Z10 production levels, which they say is up from a prior production ratio of 1.5:1

This means BlackBerry underestimated demand for the Q10, and now makes three times as many Q10 devices as Z10. This, ladies and gentlemen, is the single most important data point driving financial results over the next couple of quarters.

As Bluefin puts it, “We still see the BBRY supply chain forecasting units above Wall Street consensus even after the Z10 and Q10 launches, with the mid-range R10 handset likely coming in CQ3 and a high-end phablet by the end of the year.”