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BlackBerry (BB-T) will beat Street estimates for the next two quarters due to stronger-than-expected sales of its Q10 smartphone, according to Jefferies & Co analyst Peter Misek.
Misek says BlackBerry's latest offering, the Q10, which comes with a physical keyboard, was experiencing modest initial demand in the U.S. at T-Mobile with "pockets of strength in certain geographies."
The Street is expecting the company would sell 3 million units running on the new BlackBerry 10 operating system in the May quarter, but Misek estimates sales will top the 3-million mark. For the August quarter, he says BB10 sales, which analysts expect to exceed 3 million, will be "materially higher" than that.
Misek also notes that Q10 sales are expected to offset a slowdown in sales of the Z10 touchscreen smartphone.
"Z10 has slowed in consumer markets but some businesses [are] still evaluating," he writes in a note to clients.
The Q10, which has been approved by 255 carriers globally, is expected to appeal to many of BlackBerry's 76 million global subscribers while attracting new customers.
Analysts are expecting earnings per share of 4 cents US and revenue of $3.36 billion in the first quarter. For the second quarter analysts are looking for earnings per share of 10 cents on sales of $3.32 billion.
Free BBM app - the firm's proprietary Internet-based instant messenger -- for Android and iOS could provide further strength.
"BBM could possibly expand BlackBerry's ecosystem and increase its relevance," he says. "[There's a] possibility that BlackBerry could be a viable competitor to highly-valued WhatsApp."
BlackBerry's operating system is in close competition with that of Microsoft to become a third major player in a space currently dominated by Apple's iOS and Google's Android.
BlackBerry's not just about the phone, says Misek insisting the Waterloo, Ont.-based company's mobile device management (MDM) software -- which remotely monitors and manages a company's mobile devices - is "underappreciated."
"The MDM software will gain traction throughout this year and see a significant ramp in revenues next year," he says.
Based on its 2014 estimates, Jefferies estimates the company's stock will eventually trade at a price-to-earnings (P/E) of 15 - above other analysts' expectation for a P/E of 12.
However, Misek cautions that risks remain for the company including BB10 failing, its current subscriber base declining more quickly than expected, or if the licensing of its operating system fails to ignite interest among other handset makers.
Misek has a buy rating and a 12-month price target of $22.00 on the shares.
Once a major market player, BlackBerry has been trying to fight its way back into the reckoning after a long spell of falling market share and bad press.
The company's co-founder Mike Lazaridis stepped down as its director and vice chairman handing the reins over to Thorsten Heins in January 2012.
Heins cut 5,000 jobs and six manufacturing units and got rid of company's private jets, as part of his turnaround plan initiated last year aimed at saving $1 billion in annual costs.