Analysts at Cleveland Research have updated their comment on the BlackBerry Ltd (NASDAQ:BBRY). The analysts rate the stock a Neutral with a 12-month price target of $7.73. Among other things, the analysts have highlighted the progress of Priv, which they believe is being received well in several markets and also getting more carrier support. However, it seems to the analysts that BlackBerry Services business is falling short of growth expectations.
Adoption of Priv
BlackBerry Ltd (NASDAQ:BBRY)’s first Android-based smartphone Priv is showing early signs of strength. Existing BlackBerry owners in several markets can be seen upgrading to Priv with adoption of the handset being profound in the Middle East and African.
With the customer interest seen in Priv, it is possible the smartphone could help BlackBerry sidestep the challenges inherent in its hardware business. Cleveland predicts that more carriers will announce support for Priv in the coming months. In the U.S., only AT&T Inc. (NYSE:T) is initially supporting Priv, but Verizon Communications Inc. (NYSE:VZ) and T-Mobile US Inc (NYSE:TMUS) could also soon back.
Not only are BlackBerry customers upgrading to Priv or replacing their existing handsets with Priv, but carrier support for the smartphone is also increasing.
BlackBerry Ltd (NASDAQ:BBRY) is targeting to sell 5 million units annually before it can start generating profits in its hardware business. With Priv in the picture and the early interest it is already attracting, Cleveland sees BlackBerry moving closer to its unit sales target in 2016.
Impact on services
Cleveland also speculates that BlackBerry could be working on a second Android smartphone, possibly motivated by the warm reception of Priv. The downside, though, is that sell of off-platform handsets like Priv deny BlackBerry subscriber access fee (SAF) revenue, which could see Services income plunge or stay weak for long.
Good Technology acquisition
Cleveland believes that early closure of the Good Technology deal could see BlackBerry Ltd (NASDAQ:BBRY) escape some pressures in the Services business. Good Technology is expected to contribute overall revenue of $160 million in the first year.
$500 million for Software business
Cleveland sees BlackBerry Ltd (NASDAQ:BBRY)’s $500 million Software revenue target achievable.
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