Citi analyst Ehud Gelblum has chimed in with his expectations for BlackBerry Ltd revenue targets for the current quarter (Q4 FY15) and for the fiscal year 2016.
Gelblum lowered his expectations because he thinks that both device sales and software sales are going to be well below expectation.
According to Gelblum, he expects BlackBerry to report $213 million in revenue for its Hardware division. This would mean a big drop from the previous $493 million estimate and also a decline from last year’s $358 million in revenue for the division.
“With the Passport still in short supply, and we believe destined to be a modest volume device, the Classic just beginning to ramp in January and not yet at stores, and shipments of Z10s, Z30s, Q10s and Q5s all but finished, we expect low average selling price Z3s and remaining BB7 Bolds and Curves to make up the bulk of February quarter shipments,” Gelblum wrote.
BlackBerry has been rated as a Sell with an $8 price target (currently trading at $10) by Gelblum. He also decreased fiscal year 2016 revenue estimates from $3.24 billion to $3.22 billion.
While most of the analysts are focused on hardware division revenues, BlackBerry’s CEO John Chen has deemphasized handset sales as part of his larger strategy to turnaround the company. Chen has preferred to focus on BlackBerry’s industry-leading security and strong enterprise business.
The focus on hardware sales as cause to lower the company is an unsound judgement, despite the company operating at a loss.
As ValueWalk points out, “while disappointing handset sales may be a drag on revenue for the quarter, it isn’t likely to dissuade BlackBerry bulls because it doesn’t cut to the heart of what Chen is trying to do. The hardware division’s revenues plummeted from $2.1 billion in 1Q FY14 to $358 million in 4Q FY14, but have stabilized since then. More importantly, operating income (which was more than $5 billion in the red in 3Q FY14) is starting to get under control.”