JP Morgan Expects BlackBerry Revenue To 'Bottom' This Quarter, Adjusts Estimates

In a report published Thursday, JP Morgan analyst Rod Hall explained why he thinks BlackBerry Ltd (NASDAQ: BBRY) will post another sequential decline in services revenue when it reports its fourth quarter results on Friday before market open.

Hall cited the company's CFO James Yersh who said at CES that revenues are expected to hit a "low point" in the fourth quarter and then to grow from there driven by hardware sales. The analyst estimated BlackBerry will report total revenue of $791 million in the quarter (versus prior estimates of $807.9 million), marking a 0.2 percent decrease from the previous quarter and a 19 percent drop from the same quarter a year ago.

Hall forecasted smartphone shipments of 1.8 million, up 38 percent from a year ago but down 10 percent from the previous quarter. He also expects BlackBerry to report 1.4 million BB10 handsets to have been shipped in the quarter, up 3 percent from last quarter and more than tripling year-over-year. However, the company's subscriber base is estimated to have fallen by four million users to 36 million.

Hall noted his expectations for average selling prices to be up 20 percent from last quarter to $217 (versus prior estimates of $225.6 and a consensus estimates of $220), driven by the new high-end Classic and Passport smartphone shipments.

Finally, the analyst noted that BlackBerry achieved cash-flow breakeven in the third quarter and he expects the company to continue to be cash flow positive going forward.

Shares are Neutral rated with a $10 price target.