Is BlackBerry’s Z10 Off to a Flying Start?

Preliminary evidence shows that BlackBerry’s (NASDAQ:BBRY) one-week-old Z10 smartphone is off to a better start than many analysts had predicted. A pair of research notes from Bernstein analyst Pierre Ferragu and Barclays’ Jeff Kvaal on Monday supported early reports by Jefferies & Co. that the new device was seeing higher demand than the original BlackBerry handset did when it was released in 2003.

With a new name, a new stock market ticker, and a new plan to return to its former glory or at least grab a larger share of the smartphone market than the fourth quarter’s 4.7 percent, the company formerly known as Research In Motion has put a lot of time and money behind its new phones. But it is still too early to determine whether the initial buzz surrounding the Z10 will translate into sustainable demand over the long term.

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However, the initial noise is definitely encouraging, with channel checks showing strong demand. On Monday, analysts at Bernstein raised their price target on the company’s shares from $12 to $22 and gave a conservative estimate of the company’s prospects. “We have grown more confident in the likely success of the BlackBerry 10 launch, supported by low channel inventories, strong operator support, and material pent-up demand,” wrote Ferragu in the note seen by AllThingsD. “Initial feedback we have received from distributors on the first days of sales is particularly positive.”
Based on a survey of BlackBerry vendors in the United Kingdom over the weekend, Barclays’ Kvaal found that sales of the Z10 were solid. “We believe BlackBerry’s Z10 is off to a better start than the Lumia 920,” he wrote, according to the publication. “The solid initial demand is a positive step in our view, despite the number of challenges that remain.”

Kvaal’s comparison to Nokia’s (NYSE:NOK) smartphone may not be ideal, as the Lumia 920 was supply-constrained at the time of its release. At this point in time, analysts’ supply checks do not exclude the possibility that the BlackBerry is experiencing a case of modest demand supplemented by a modest supply. However, the Lumia did lift Nokia’s overall smartphone shipments in the fourth quarter for the first time in a year, so the comparison does carry a positive sentiment.

If the current channel checks prove to be an accurate prediction for the near future, BlackBerry could well be on its way to the much-discussed comeback, although a return to its 2009 market share of 20.8 percent will take more than solid sales of its new smartphones. BlackBerry will have to outperform devices powered by operating systems designed by Apple (NASDAQ:APPL), Google (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT), and without a catastrophe, BlackBerry is highly unlikely to upstage the industry’s giants.

Shares, which have been extremely volatile of late, dropped 26 percent following the underwhelming launch of BlackBerry 10. However, based on Tuesday’s encouraging Z10 sales news, the stock was on an upswing.

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