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BlackBerry Drops as Analysts Downgrade on Valuation Concern

BlackBerry's results topped Wall Street estimates. But the stock is lower as a number of analysts cut their ratings, citing valuation.

Shares of BlackBerry (BB) - Get BlackBerry Limited Report were falling on Friday after it reported results that topped Wall Street estimates but analysts cut their ratings on the stock, citing valuation.

Analysts at Canaccord, CIBC and TD Securities downgraded the stock despite the results beat. BlackBerry has been caught up in the meme-stock craze, which has boosted the valuation of several companies. 

At last check BlackBerry shares were off 5.9% at $11.93.

Canaccord cut the stock to sell from hold and affirmed a $10 price target on the Waterloo, Ontario, company. 

Analyst T. Michael Walkley said in a report that “the recent sharp appreciation in the share price to well above our price target results in us downgrading [the stock] from hold to sell.”

BlackBerry’s management "has created a cogent long-term strategy and the business is turning the corner toward stronger trends,” the analyst wrote.

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But “we await more proof in execution on the new product roadmap, evidence of cross-selling opportunities emerging, growing overall software and services revenue, and the potential for upside to our estimates before becoming more constructive on the shares."

Analysts at CIBC downgraded the stock to underperform from neutral while raising their price target to $11 a share from $9. 

"The recent rise in BlackBerry's share price due to WallStreetBets/Reddit interest has pushed it past its fair value given muted growth prospects," analyst Todd Coupland said. 

TD Securities lowered its rating to reduce from hold with an $8.50 price target, saying that the stock's "high valuation relative to fundamental performance" led to the downgrade. 

Analysts at RBC affirmed an underperform rating and a $7.50 price target. The results were "effectively in line" with RBC and consensus expectations but the company's core software business "continues to struggle."

Raymond James maintained its market-perform rating and $9.50 price target with analysts saying the company's enterprise software segment continues to struggle  in non-regulated spaces.