Calling Up Motorola
By STEVEN M. SEARS | MORE ARTICLES BY AUTHOR
Use options to bet that an innovative smartphone will push the stock to a new 52-week high in the coming weeks.
GET READY FOR Motorola (ticker: MOT) to soon rally to a new 52-week high.
MKM Partners, an institutional brokerage firm, is telling clients to buy bullish call options in anticipation the $8 stock rallies on the expected launch of a new Android phone tied to wireless carrier AT&T (T).
The new phone is expected to debut during the Consumer Electronics Show that starts January 6 at in Las Vegas. The Street is gaga over hot phones because investors believe everyone wants to interact with the world with a device that fits into their pocket.
The success of Apple's iPhone, and Google's Android operating system are proof.
The expectation is that AT&T will promote the high-end Motorola dual-core Andorid phone at the beginning of 2011 as the company prepares to lose its iPhone exclusivity.
In addition, "we view the tepid early Windows Phone 7 sales as improving the demand outlook for Motorola's Android phone," Jim Strugger, MKM Partner's derivatives strategists advised clients in a Monday note.
To profit from Motorola's anticipated advance, Strugger told clients to consider buying the stock's January $7.50 calls that recently traded at 81 cents.
Strugger says he expects Motorola's positive news flow in the coming weeks, to move the stock's share price toward our $10 per share 12-month price target.
To be sure, Motorola's stock chart does not look very attractive. In the past 52-weeks, the stock has ranged from a low of $6.04 to a higher of $8.74. The 23 analysts who follow the company are divided. In the past month, nine analysts have increased Motorola's earnings estimates for the fourth quarter, and seven have lowered their projections. The consensus earnings estimate is 15 cents per share, compared to a high of 17 cents and a low of 14 cents.
Trades based on anticipated product launches are always speculative, and thus not for everyone. But for those who don't mind a little risk, this trade is priced right to spice up the holidays.
Comments: steve.sears@barrons.com |
