BlackBerry Ltd (NASDAQ:BBRY) aims to get its QNX operating system to become the dominant OS in the automotive world, but analysts are split on how successful the company’s efforts are thus far. Some feel that the company’s efforts around BlackBerry QNX Neutrino are impressive, while others say they’re doubtful.
BlackBerry QNX Neutrino in more cars
Macquarie analyst Gus Papageorgiou recently visited the company’s QNX headquarters to learn more about its BlackBerry QNX Neutrino operating system. Following that visit, he reiterated his Outperform rating and US$11.40/ C$15.20 target price on the company’s stock, so he was clearly impressed with what he saw. In fact, his long-term target price for BlackBerry is $45 per share.
According to him, BlackBerry may be able to push this metric into the “very high single digits.” He also feels that BlackBerry QNX Neutrino can become the default automotive operating system similar to how iOS and Android are for smartphones and Windows is for PCs. If BlackBerry achieves this, he sees “significant financial benefits.
Cyber-security for the car?
He sees the delivery of a platform that’s compliant with POSIX that developers will be able to support as one of the most important software development areas. And if the company successfully does this, he believes the average selling price per car for BlackBerry QNX Neutrino will be “well above” the $1.50 that’s estimated currently.
The Macquarie analyst also believes that BlackBerry is working on some kind of cyber-security service for the connected car for release sometime this fall. Given the company’s strength in the area of cyber-security, this is a natural expansion for QNX, and Papageorgiou sees the potential for a major recurring revenue stream here.
Given how often hackers are successfully breaking into cars and sometimes taking over control of some models, it seems pretty clear that strong cyber-security is needed for connected cars even before most people own cars that are connected to the Internet all the time. Consumers would probably gladly pay quite a bit to protect their vehicles.
“Doubtful” automotive efforts?
Goldman Sachs analyst Gabriela Borges is extremely bearish of BlackBerry’s efforts around QNX, calling them “doubtful” in a report earlier this month. She has a Sell rating and $8.50 price target on BlackBerry shares.
Based on the company’s own commentary “and 2-3 year production cycles,” she feels that BlackBerry’s auto business won’t ramp much until 2019, adding that the auto business was “trading at an implied 13-17X revenue.” She warned also that she sees risks that the company will miss estimates for the second half of fiscal 2018 and for fiscal 2019, adding that she believes enterprise mobility is becoming even more competitive as bigger providers bundle their offerings.
BlackBerry shares tumbled on Tuesday, falling by as much 1.01% as to $8.86 on the NASDAQ. The stock reached its highest levels in three years in late May and early June and since has been pulling back.