(MENAFN- ProactiveInvestors) Shares of (TSE:BB) (NASDAQ:BBRY) fell in Toronto Wednesday for its fourth straight day of declines after downgraded the smartphone maker to underweight from equal weight on the belief that both markets and management are too optimistic on its new products.
The stock dropped 4.2 percent to C$11.66 as of 1:45pm ET paring year-to-date gains to 47.6 percent. Shares dropped 3.9 percent to US$10.35 in New York.
"We believe that the market has swung too optimistic assuming the company will meet its target of $350M in new software revenue in FY16. We think the competitive market and organizational hurdles will likely keep BBRY’s results well below its plan" analyst James E. Faucette wrote.
said it believes the market has largely valued the company based on the assumption that will generate an incremental $250 million in software revenue and an additional $100 million in messaging revenue during fiscal year 2016 consistent with the targets set out by CEO John Chen.
Faucette who argues these expectations are excessive estimates this implies that will not only "successfully retain roughly its entire existing enterprise subscriber base -- plus more -- it will also convince that subscriber base to increase 3x how much it is paying today."
Since taking over as ’s chief executive officer a year ago John Chen has focused on business users and outsourced some device manufacturing. Partnerships seem to be the next step in his plan to return the company to profitability by 2016. It unveiled a management-services partnership with rival earlier this month.
The company is also planning to launch its long-awaited Classic smartphone on Dec. 17 at events in New York Frankfurt and Singapore as it looks to regain market share from and prove that its handsets can compete in the iPhone-dominated market. The device which bears similarities to the once popular Bold will go on sale immediately in launch markets and be priced at $449.
In addition last week held an event in San Francisco California to launch the Enterprise Service or BES12 which will allow corporations and government agencies to manage and make secure not only 's mobile devices but also those running operating systems such as 's () Android 's () iOS and 's () Windows platform.
said hitting the company's targets relies too much on new devices and margins and that part of 's plan to get earnings and cash flow to breakeven during fiscal year 2016 is through improving profitability of handset products substantially.
"While we expect that BBRY may be able to increase its GM on new handsets to the mid-20’s range we do not expect that BBRY will hit its needed level of 10M units in FY16 to get to OM breakeven."
The investment bank adjusted its estimates for increasing device and messaging revenue while lowering service revenue. While revenue forecasts overall have increased slightly earnings per share estimates have been reduced as a result of more revenue coming from lower margin devices.
has a $7 price target on .
"When we initially set our EW rating in June 2014 we felt the market was too pessimistic on the ability of the company to stem the cash burn and EPS losses.
"However we now believe that the pendulum has swung too far in the other direction and that the market is now too willing to give the company the benefit of the doubt that BBRY will successfully be able to sell its new software and messaging offerings."
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