Citi Analyst Not Bullish On BlackBerry Ltd (NASDAQ:BBRY)

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) estimates have been lowered by Citigroup analyst Ehud Gelblum owing to lower device shipments. Analyst expect fiscal 2016 is “not enough likely to go for the gold” as it considers a slower ramp of Software revenues.

BlackBerry shares a risk to hold

According to Gelblum, hardware revenue is expected to come in at $213 million for the quarter ending February. This will be a decline of 41% quarter over quarter from the previous estimates of $493 million. Gelblum has also dropped revenue estimates to $3.22 billion from $3.24 billion for the full fiscal 2016.

The analyst stated in the report that a portion of the original EZ-Pass Silver licenses could convert into the more expensive Gold level in the year. Analyst conclude that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) would need 40% of the original licenses to go for Gold to hit the target of $500 million.

The Waterloo Ontario-based company’s share may be a risk to hold as the company is still operating at loss. Chen has maintained for long that his turnaround efforts will start paying off in the long-run, and the company has already sailed through the storm in the previous year. There is still lot to be done to bring it back on the profitability track. Chen has high hopes from software and service revenues, and believe that these two pillars could help the company win back its past glory.

Handsets not at focus

“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.

Decent shipment volumes are not breaking news because BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) CEO John Chen has over and again stated that handset sales are only a small part of the bigger picture, and the company is focusing on the security and strong enterprise business. Although Chen has never ruled out mobile market, priority for now is the software segment. Even though BlackBerry hardware sales are not as expected, it will not deter bulls as they firmly believe in what Chen is trying to do.