NEW YORK (TheStreet) -- Shares of BlackBerry Ltd. (BBRY) are down 3.53% to $10.38 in pre-market trading on Wednesday after the company was downgraded to "underweight" from "equal-weight" at Morgan Stanley.
The firm reiterated its initial $7 price target for the Canadian telecommunication and wireless equipment company.
Morgan Stanley said it lowered BlackBerry's rating because management and the market are likely too optimistic about new product ramps.
"[BlackBerry] will be unable to gain relevancy in enterprise mobile management software market and will continue to lose enterprise subscribers," said analysts at Morgan Stanley. "Pressure will continue to mount on hardware platforms in the form of both lower pricing and lengthening life cycles, with value creation opportunities primarily in software."
Separately, TheStreet Ratings team rates BLACKBERRY LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate BLACKBERRY LTD (BBRY) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market, BLACKBERRY LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- The revenue fell significantly faster than the industry average of 13.8%. Since the same quarter one year prior, revenues fell by 41.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.43, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that BBRY's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.39 is high and demonstrates strong liquidity.
- BLACKBERRY LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BLACKBERRY LTD reported poor results of -$11.17 versus -$1.20 in the prior year. This year, the market expects an improvement in earnings (-$0.26 versus -$11.17).
- The gross profit margin for BLACKBERRY LTD is rather high; currently it is at 57.97%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -22.59% is in-line with the industry average.
- You can view the full analysis from the report here: BBRY Ratings Report