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BlackBerry Wins Settlement, But Investors Should Wait

We’re raising our fair value for BlackBerry to account for the $815 million cash infusion, but we’d wait for a larger margin of safety before investing.

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BlackBerry shares soared this week on the announcement that it was victorious in an arbitration case against Qualcomm, winning what essentially amounts to a refund of approximately $815 million on royalties paid on prior handset sales.

The decision, which cannot be appealed by Qualcomm, was related to BlackBerry's now defunct handset business. BlackBerry, which will receive the payment later this year, may utilize the additional cash to make more acquisitions in enterprise mobility management or the Internet of things space.

Returning the cash to shareholders, perhaps even in the form of a one-time dividend, is also a possibility.

We slightly lowered our SG&A expenses going forward as we are assuming the firm will no longer needs additional advisory services regarding this arbitration.

All in, we are raising our fair value estimate of BlackBerry by 12% to $9.50 per share, from $8.50, after incorporating this one-time gain into our model.

While we still see a 6% upside based on our higher fair value estimate, we recommend a wider margin of safety before getting into this 3-star and very high uncertainty name.

Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.