BlackBerry Ltd. rose as high as 7.4 percent after a Morgan Stanley analyst upgraded his rating on the stock on the strength of the smartphone maker’s cash reserves and ability to further cut costs.
James Faucette raised his rating to the equivalent of a hold from the equivalent of a sell in a note to clients Tuesday. BlackBerry climbed 7.1 percent to $7.80 at the close in New York, the most since Jan. 14.
BlackBerry has fallen 29 percent this year as some analysts and investors have questioned whether Chief Executive Officer John Chen can turn around the company and reach the goal of doubling software revenue to $500 million by March 2016.
“While there is no evidence of a fundamental business turnaround, BlackBerry has flexibility with cash and opportunity for op-ex cuts that create value,” Faucette said in the note. “The company still has significant opportunity to add to that cash balance through headcount reductions or other reallocation of resources.”
BlackBerry cut some jobs last week in an effort to shift resources to the software side of the business, though it declined to say how many total employees were affected.
Chen has built up the software business by acquiring smaller security-focused companies, striking a patent-licensing deal with Cisco Systems Inc. and signing up more wireless carriers to sell its mobile-device management product, which helps companies and governments keep track of and secure their employees’ phones and tablets. BlackBerry’s first-quarter software revenue, reported on June 23, more than doubled to $137 million from the same period a year earlier.
Faucette, in his note, maintained his price target at $7, saying BlackBerry is still unlikely to reach Chen’s goal of $500 million in software revenue and $100 million for its messaging business. It’s “not unreasonable” that the company could make $400 million from software, he wrote.
In an interview last week, Chen said he’s still early into his turnaround.
“I know there’s a lot of impatience out there right now, if you look at our stock price, you know it’s very impatient,” he said. “People need to be patient. It’s the right thing. It’s the right market.”