BlackBerry Earnings: Lower Cybersecurity Forecast Brings Valuation to $3.40, but IoT Still Positive

We lower our fair value estimate for shares of no-moat BlackBerry to $3.40 per share from $4.40 as we lower our long-term growth forecast for the firm. We continue to see BlackBerry as a split story, with a well-positioned and growing automotive software business offset by an underperforming cybersecurity business. We believe management is making progress on inflecting cybersecurity results back to growth and improving the firm’s overall cost structure, but we lack confidence in the cybersecurity business growing in line with peers. August quarter results came in above our expectations, and we see guidance for continuing sequential growth positively. Shares remain undervalued against our updated valuation, but we’d recommend investors look for moatier software names.