BlackBerry rose as much as 7.4 percent after Morgan Stanley analyst Ehud Gelblum raised his rating on the stock to the equivalent of buy, saying the new BlackBerry 10 smartphone lineup will boost profit margins.
As existing users upgrade to newer phones, it should "meaningfully" drive up profitability and the average selling price for a BlackBerry, two key benchmarks for the company, Gelblum said today in a note. He estimates that gross margin -- the percentage of sales left after production costs -- reached 33 percent in February, up from 31.6 percent in November.
BlackBerry, formerly known as Research In Motion Ltd., is counting on the new Z10 and Q10 phones to regain market share after years of losing ground to Apple Inc.'s iOS and Google Inc.'s Android platform. Android, used by Samsung Electronics Co., and iOS together accounted for 91 percent of global smartphone sales in the fourth quarter, according to IDC. BlackBerry's share dropped to 3.2 percent.
Gelblum, who is based in New York, raised his rating to overweight from underweight and boosted his target price to $22 from $10. Still, the probability that BB10 emerges as a "viable" third operating system remains small, he said.