Motorola Mobility: Today’s The Day; Oppenheimer, Gleacher Say Buy
By Tiernan Ray
January 4, 2011, 6:53 AM ET
blogs.barrons.com
Today’s the day: Motorola (MOT) officially splits into two companies, Motorola Mobility, holding the handset and the home set-top box businesses, and Motorola Solutions, holding everything else.
And it’s a big week for it to happen: Motorola is widely expected to show off some new gear for handsets and tablets at the Consumer Electronics Show in Las Vegas that could help advance its position among developers of devices based on Google’s (GOOG) Android software.
Oppenheimer & Co. analyst Ittai Kidron this morning initiated coverage of Moto Mobility with an Outperform rating and a $35 price target. The Moto shares, which have been trading on a “when issued” basis under the provisional ticker “MMIWI,” closed up $1.14, or 4%, at $30.24 yesterday.
(You may have some trouble finding just the normal ticker, MMI, today, while the shares settle into their new quotations on the various stock Web sites. The NYSE itself is a good place to go looking for the ticker.)
This quarter will be bumpy for Moto, with Kidron modeling the company seeing a 22% drop in shipments from Q4, thanks to the arrival of Apple’s (AAPL) iPhone at Verizon Communications (VZ), as is widely rumored. But Kidron also thinks Moto will make it up later, ultimately delivering a 22% rise in smartphone unit sales in all of 2011.
Further, Moto’s average selling price could rise 8% this year, he believes.
As for the rumored “Xoom” wireless tablet, which may or may not make an appearance this week, Kidron estimates that for every 1 million units sold, Moto will bring in an extra 12 cents per share in profit, assuming an average selling price of $550 and an operating margin of 10%. That’s an extra 21% in 2011 EPS, he notes.
With the stock at a 0.35 times multiple of enterprise value to sales, the risks of an overhang from a Verizon iPhone seem already baked into the shares, writes Kidron.
Gleacher & Co. analyst Mark McKechnie also put out a Buy rating this morning, and a $36 price target. His note is titled, “Riding the Android Wave.” He expects Moto to “remain a top player” in that ecosystem. Android will have upward of a quarter of the 500 million industry smartphones and tablets by 2012, he estimates. Moto should be able to “participate in a meaningful way.” |
