BlackBerry shares are trading sharply higher
BlackBerry shares are trading sharply higher Tuesday as the Street continues to provide positive commentary on the U.K. launch for the new BlackBerry Z10.
Barclays analyst Jeff Kvaal, while keeping his Neutral rating and $7 price target on the stock, is offering some upbeat commentary on the early sales of the new phone.
“Our recent store checks suggest that initial sales of the BlackBerry Z10 are off to a solid, if not healthy start in the U.K,” he writes in a research note. “We believe this is a function of strong sell through versus limited sell in. We spoke to a number of stores over the weekend that cited strong demand with some selling out of the Z10 full touch device completely. Our checks are anecdotal of course, and early. Healthy early demand does not always translate to strong demand over time, though poor initial demand is difficult for vendors to recover from.”
Kvaal says he assumes sales so far have predominantly been to existing BlackBerry users.
“One store rep suggested sales in the ‘hundreds’ of units,” he writes. “The expectation was that more devices would be delivered during the upcoming week. We believe the stock outs are a function of strong sell through rather than limited sell in by BlackBerry. We note Nokia’s November launch of the Lumia 920 faced significant initial supply constraints in contrast. We believe BlackBerry’s Z10 is off to a better start than the Lumia 920. The solid initial demand is a positive step in our view, despite the number of challenges that remain. The U.K. represents one of BlackBerry’s largest markets with ~11% of revenue in fiscal Q3 and has historically had a loyal user base of ~8 million subs.”
For the long run, Kvaal remains a skeptic.
“We believe there are significant challenges ahead for BlackBerry outside of this first positive step,” he writes. “These include attracting a declining enterprise sub base to BB10, attracting entirely new subs back to the platform and the challenges of dealing with a declining Service ARPU. Additionally, we note that RIM’s success in recent years has come primarily from emerging markets, which the BB7 phones wholesale for $200. We believe it will be several years before RIM can address this market with its BB10 phone.”
BBRY is up $1.11, or 7.4%, to $16.09; that follows a 15% move yesterday, for a two-day rally of 24%.