TD Securities, Morgan Stanley Differ On BlackBerry After Mixed Report

NEW YORK (TheStreet) -- Shares of BlackBerry (BBRY) are climbing after the company on Friday morning reported higher than expected third quarter profits and revenue that came in significantly below analysts' consensus estimate. In notes to investors today, two research firms had widely divergent views on the smartphone maker's outlook.

BULLISH TAKE: In a note to investors today, TD Securities analyst Scott Penner upgraded BlackBerry to Buy from Hold. BlackBerry's revenue miss was entirely caused by lower than expected average selling prices for the company's devices, according to the analyst. However, BlackBerry is transitioning to a software and services provider, Penner believes. It is primarily using its devices to maintain a user base that will buy its software and services, making its device sales "arguably less relevant" to its performance going forward, he stated. BlackBerry is offering "compelling new services," and higher sales of its software and services should cause its profitability to rise, wrote Penner. However, the analyst said that it would not be easy for the company to increase its revenue, and said that he was uncertain as to when the revenue gains would occur. Penner kept a $13 price target on the shares.

BEARISH TAKE: On Friday, BlackBerry CEO John Chen said that it takes six to nine months to convince enterprises to adopt software, Morgan Stanley analyst James Faucette wrote. Meanwhile, BlackBerry has not yet started to try to convince its EZPass license holders to convert to paying customers, Faucette quoted Chen as saying. Under the EZPass program, companies have made free reservations to buy BlackBerry's new software starting on February 1, 2015 , Faucette stated. Chen's comments indicate that BlackBerry's software revenue will not start increasing until the second half of its fiscal 2016, making its goal of generating $500M of software revenue in fiscal 2016 unrealistic, the analyst contended. He kept a $7 price target and Underweight rating on the shares.

PRICE ACTION: In mid-morning trading, BlackBerry rose 38c, or 3.8% to $10.37.

Reporting by Larry Ramer.

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