Goldman Sachs

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.