BlackBerry (BBRY) shares continued down on Thursday morning after a research note from Wednesday evening called the company’s comeback prospects into question once again. In a note to investors picked up by Barron’s, National Bank Financial analyst Kris Thompson cut his revenue and profit forecast for BlackBerry’s upcoming fiscal year while casting doubt on its prospects with the BlackBerry Z10 in light of what he calls a delayed U.S. launch.
“For the record, we like the Z10. It’s a great upgrade for BlackBerry subscribers,” Thompson wrote. “But we don’t see the product reversing BlackBerry’s market share decline; only providing a short-term stabilization from BB6/7 upgrades. We do not expect the platform to win over many iOS or Android users. The apps just aren’t there; and apps are not moving to the web browser soon enough to fill this void.”
He continued, “Z10 product launch delay an ominous sign. The bulls will say that the Z10 launched in Canada and the UK first because those are very loyal bases, production runs couldn’t support the U.S. launch, or kinks can be worked out ahead of the U.S. launch. We’d say the U.S. carriers have enough smartphones that they test new ones to their own drum beat and aren’t too interested in paying the monthly BlackBerry subscriber fee.”
Elaborating on his comment regarding BlackBerry’s services business, Thompson went on to paint a dark picture of BlackBerry’s earnings moving forward.
“The product delays do not have a major impact on our estimates (although sell-through may be worse than expected given the multitude of competing devices that will now launch at the same time),” he wrote. “Our prelim F2015 estimates suggest earnings will worsen as the high-margin service revenue is subject to a significant decline as the install base dumps BB7 (and predecessor) handsets and adopt BB10 handsets.”
Thompson noted that since BlackBerry executives have not been forthcoming with details surrounding BlackBerry 10 service fees or legacy fee concessions considering carriers will likely no longer pay fees for non-enterprise users, National Bank Financial has had to make some assumptions.
“Many BB10 users will not pay a monthly fee – we have assumed consumer BB10 subs pay nothing and enterprise (BES10) subs pay $3/month (less than half of historical, which is a guess… data plans need to be re-negotiated because the BB10 devices require more data since, for instance, the browser no longer compresses data, which was a major drag on browser performance),” the analyst wrote.
Thompson reiterated his Underperform rating on BlackBerry shares along with his $10 price target.