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BlackBerry Ltd (BB) on Track to Take Advantage from Automotive; Key Takeaways From CES 2018

Though RBC Capital's Paul Treiber likes BB's automotive position, he nonetheless pinpoints 19% downside potential for shares.


BlackBerry Ltd (NYSE:BB) is benefiting from the buzzing event of the tech-verse, the Consumer Electronics Show (CES) that has a whole world captivated each year, even from the eyes of an analyst who continues to play it very safe when it comes to this tech giant.

RBC Capital analyst Paul Treiber likes the clarity CES has offered Blackberry on its automotive position, believing the company is in good standing to take advantage from this prospect.

However, finding that share levels reflect this opportunity and with “competition […] everywhere,” the analyst reiterates a Sector Perform rating on BB stock with an $11 price target, which implies a 19% downside from current levels. (To watch Treiber’s track record, click here)

After attending CES, the analyst shares his insights following a meeting with the BB management team coupled with various other players in the automotive software ecosystem. “While we believe BlackBerry appears well positioned to benefit from automotive, automotive is a relatively small portion of BlackBerry and the opportunity appears priced into the shares,” Treiber writes, believing the QNX automotive opportunity will bring $99 million in revenue for fiscal 2018, a 13% slice of the total software revenue. The management team has maintained its expectations to accelerate QNX automotive revenue by three to five times from $2 to $3 per vehicle where the company stands present-day throughout the upcoming three to five years. Though gains could be “back-end loaded,” the analyst notes his guide looks for BTS/QNX revenue to rise 24.5% by fiscal 2019.

Additionally, the analyst comments that Blackberry is “Losing infotainment, capturing other segments,” highlighting: “Based on our discussions at CES, BlackBerry’s QNX appears to be losing share in infotainment to AGL (Automotive Grade Linux) and Android. Despite the loss of infotainment, BlackBerry aims to increase the number of licenses per vehicle as auto OEMs deploy telematics, digital instrument clusters, hypervisor, acoustics, and ADAS/autonomous.”

Ultimately, the analyst contends that when it comes to Blackberry, the stock is very much a case of “Valuation rich, visibility low.” Treiber surmises, “While we believe BlackBerry will be a player in next-generation automotive software, this appears to be priced into the stock.”

TipRanks indicates a cautious Wall Street sentiment that seems to back Treiber’s play-it-safe stance. Out of 6 analysts polled in the last 3 months, 2 are bullish on Twitter stock, 3 remain sidelined, and 1 is bearish on the stock’s opportunity. With a loss potential of nearly 21%, the stock’s consensus target price stands at $10.68.