BlackBerry may be in even worse shape than previously thought.
The company is poised to burn through nearly $2 billion in cash over the next six months, putting its liquidity at risk, according to Pierre Ferragu, an analyst at Sanford Bernstein. He downgraded the stock to "underperform" and placed a price target of $4.50 after a deeper analysis of the company's quarterly filing. It last traded at $7.73.
The downgrade represents just the latest setback for a company that is facing an increasingly uncertain fate. With mounting losses and no evidence that its newer BlackBerry 10-powered devices are seeing consumer adoption, it's unclear just what happens to the company.
BlackBerry is losing customers at a high rate, has stretched its working capital and continues to have massive financial commitments that will cause the cash burn over the next year, Ferragu said.
As a result, he doesn't believe any investor would want to touch BlackBerry. While the company has announced a deal with major shareholder Fairfax Capital, there remains concern that it doesn't have sufficient investor backing to pull off the deal.
"We see close to zero chances for the Fairfax-led consortium to succeed," Ferragu said in his research note.
BlackBerry and Fairfax have insisted that a deal, which valued the company at $9 a share and $4.7 billion in total, would go through. But with BlackBerry showing little progress in smartphone sales, it's not clear why any investor would jump in.
BlackBerry previously said it would shift away from the consumer business and focus on serving the business customer. On the phone side, however, many people are already bringing their own devices to work -- a trend that largely leaves BlackBerry out of the mix.
On the business end, Ferragu noted that BlackBerry has been cautious in its comments about adoption, only touting the number of trials that companies are holding. But with so much uncertainty, business clients may be reluctant to commit to a company that may or may not be around in the next year.
BlackBerry's escape route? A possible "strategic acquisition" by a company that doesn't care about BlackBerry's financial prospects, and that may be looking to buy it for its technology and not for a return on its investment, Ferragu said. With Microsoft already tangled up with Nokia, and BlackBerry having already put itself up for sale, it's unclear who that white knight will be.