We Reduce our BlackBerry FVE to $5.90 With Lower Confidence in Long-Term Cybersecurity Execution

We cut our fair value estimate for no-moat BlackBerry to $5.90 per share, from $7.00, with reduced confidence in the firm’s ability to improve the execution of its cybersecurity business following fiscal third-quarter results. In our view, BlackBerry’s cybersecurity position has worsened, with sales well below levels of two years ago despite a fast-growing market. We also expect elongating sales cycles at enterprise customers over the next 12 months to add a headwind to a potential security rebound. We continue to see the firm’s embedded software in vehicles and industrial applications as a strong performer, but with weak monetization potential. Shares remain below our reduced valuation, but we remind investors of our Very High Uncertainty Rating on BlackBerry, and encourage seeking moatier software investments.