BlackBerry's Future at Stake (Update 1)

Updated from 8:59 a.m. EST to provide additional estimates and analyst comments regarding fourth quarter guidance in the seventh paragraph.

NEW YORK ( TheStreet) -- BlackBerry ( BBRY) is scheduled to report fourth-quarter earnings Thursday morning and while recent news has been less than stellar regarding the launch of the BlackBerry Z10, the company's outlook for fiscal 2014 is going to be key.

The launch of the BlackBerry Z10 has been notably weak in the U.S., with some analysts downgrading the stock after its recent run up. Goldman Sachs analyst Simona Jankowski removed the Waterloo, Ontario-based technology firm from Goldman's Americas Buy List due to a disappointing launch at AT&T ( T), downgrading the stock to "neutral" and lowering the price target to $17 from $19.

"We now assign a 20% probability of success for BB10, down from 30% previously, as the disappointing launch of the Z10 at AT&T reduces our confidence that sell-through of the BB10 will be successful in the important US market," Jankowski wrote in her report.

Earnings prospects for the fourth-quarter are dim, with consensus that BlackBerry loses more money this quarter. Analysts polled by Thomson Reuters expect BlackBerry to post a loss of 29 cents per share on $2.84 billion in revenue. Analysts surveyed by Estimize are looking for a loss of 29 cents per share on $2.85 billion.

Despite the projected earnings loss, if BlackBerry and CEO Thorsten Heins can alleviate some of the fears that investors have regarding the weak BlackBerry Z10 launch domestically, that could continue to demonstrate a bullish tone, says National Bank Financial analyst Kris Thompson.

"Management is doing a better job at promoting early Z10 successes (e.g., press releasing a record one-million unit order, Thorsten commenting on converting iOS and Android users to the Z10) and we expect a bullish tone on the conference call," Thompson wrote in his report. Despite the expected bullish tone, Thompson is not optimistic about the company's financial performance. "Given our thesis of a fast declining paying BB7 base and an unprofitable stand-alone hardware business, we would continue to avoid this stock."

JPMorgan analyst Rod Hall believes that BlackBerry will continue to see an uphill struggle to gain adoption, but the introduction of BlackBerry 10 could be good for average selling prices. "We continue to believe that BBRY faces an uphill struggle to gain adoption of a new smartphone OS this far down the road," Hall wrote in a note. "As a result of that view and slightly later actual shipment than we were modeling we are reducing our unit shipment expectations. However, given the higher likely selling price of new BB10 based devices we tweak our ASP forecasts up slightly."

The count of BlackBerry 10 subscribers will be a key number to focus on, in light of the fact BlackBerry recently announced an established partner ordered 1 million units. BlackBerry did not say who it was, but other media outlets have reported the partner was Brightstar, a company that handles the majority of Verizon's ( VZ) retail distribution.

TD Securities analyst Scott Penner expects 1 million BlackBerry 10 subscribers for the fourth-quarter, but the next quarter will be a better gauge. "Given that most all BlackBerry subscribers are on a QWERTY device, the May quarter (availability of the Q10 is likely April for many markets and May/June for the U.S.) will be a better initial gauge of shipments," Penner wrote in a report. He rates BlackBerry "hold" with a $17 price target.

There has been a lot of concern about BlackBerry 10 entering an increasingly crowded market, as it goes up against smartphone behemoths such as Apple ( AAPL) and Samsung. Research firm Gartner said BlackBerry's shipments to emerging markets declined 33% year over year and 20% sequentially in the fourth quarter of 2012.

A recent IDC survey shows that Apple owned 21% of the smartphone market in the fourth quarter of 2012, with Google's ( GOOG) Android owning 70.1%. BlackBerry's market share fell to 3.2% in the fourth quarter, shipping 7.4 million units.

Hudson Square analyst Dan Ernst believes the recent upside in shares may be unwarranted, particularly as the competition heats up.

"... Execution issues, broader demand concerns, and competitive threats lead us to believe greater risks to the downside for Blackberry's stock exist than for further upside as the year progresses," Ernst wrote.

BlackBerry shares have performed strongly this year, gaining 21.8% year-to-date, outperforming the broader Nasdaq.

-- Written by Chris Ciaccia in New York

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