Shares of BlackBerry Ltd (TSX:BB)(NASDAQ:BBRY) have reached their highest levels since March following an upgrade from the financial firm Raymond James. That firm now rates the company as “outperform,” boosting its price target from $8 to $10.50. With shares still stuck around $8, there could be over 30% in upside to go should Raymond James’s estimates prove correct.

Over the past three months, optimism has heated up; shares have risen sharply from lows of about $6. However, despite the momentum, there are still some serious long-term headwinds BlackBerry must face and defeat in order to survive.

The overall business is still crumbling

Last quarter BlackBerry posted a loss of US$690 million. The losses are mounting, too; the company experienced a US$238 million loss the previous quarter and an US$89 million loss the quarter before that. So far, the underlying financials haven’t kept up with the growing sense of optimism.

The reason behind growing losses isn’t new. After peaking at 20% in 2009, BlackBerry’s smartphone market share has fallen to just 1%. The handset division sold 500,000 phones last quarter, nearly 100,000 fewer than the quarter before. In the mid-2000s, the company was selling millions of phones every quarter.

Failing products resulted in crumbling financials. Since 2011 revenues are down 70%. Supporting its flagging smartphone segment is also a huge cash drain, considering over 65% of its research and development budget is related to hardware.

Ditching hardware is a necessity for continued survival. Fortunately, investors recently received some good news. Last month the company finally admitted defeat, revealing that it will discontinue production of its Classic cellphone model.

On a larger note, BlackBerry has told major U.S. carriers like Verizon Communications Inc. and AT&T Inc. that all devices running BlackBerry 10 will be discontinued. According to The Globe and Mail, BlackBerry is finally starting to “shift its focus further away from its money-losing handset business and toward its software.”

Is a turnaround in the mix?

For years, playing BlackBerry’s eventual turnaround has been a money-losing proposition. Since 2012 the stock has experienced a decline of over 50%. That’s not even including its fall from over $200 to under $15 leading up to 2012.

Despite growing optimism over the last 12 months, there’s simply no reason to believe BlackBerry is going to be a stronger business anytime soon. Revenues and profits continue to fall, and the company experienced $61 million in negative operating cash flows last quarter.

If you think that software is the future, you’d be right. These sales come with higher profit margins, and 70% of software sales are recurring, so BlackBerry can count on these sales for many quarters to come. This year sales for its software and services unit grew to US$166 million in the first quarter, beating declining hardware revenues of just US$152 million. “If it is successful, the sustainability of profitability is very high,” BlackBerry’s CEO said.

But first, BlackBerry must shed its hardware segment, which will likely garner little in return. Even if it shut down that business today, the company would still experience millions in restructuring costs that should stretch for quarters to come. If you’re looking to play the ultimate rebound in BlackBerry, you’re best off waiting for a few more dominoes to fall.

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Fool contributor Ryan Vanzo has no position in any stocks mentioned. The Motley Fool owns shares of Verizon Communications. Verizon Communications is a recommendation of Stock Advisor Canada.