Moto: Handset Biz Fetches Almost Nothing, Says Goldman
By Tiernan Ray
Folks, my apologies for coming late to the following: Goldman Sachs’s Simona Jankowski today reiterated a Buy rating on shares of Motorola Mobility (MMI), and a $34 price target, writing that the stock is undervalued based on a sum-of-the-parts analysis, and that upside in smartphone sales could boost the bottom line.
On the valuation side, the handset business may be trading at only one or two times projected earnings per share, because the current stock price is almost entirely reflective of the other assets: $8 per share in deferred tax assets, $11 per share in cash, and the $3 to $4 per share that the set-top box business may be worth. (Regarding the deferred tax asset, $2.4 billion, she observes it, “is currently largely offset by a $2.3 billion valuation allowance due to MMI’s recent lack of profitability, thus it does not fully appear on the balance sheet.”)
Of course, the handset business has been losing money, and the question is whether it will finally turn profitable this year.
Jankowski thinks it will, and she assigns a 7 times P/E multiple to the 2012 estimated EPS of $1.61 cents per share for that unit. That would produce a stock value of $11.29 per share just for handsets.
Moreover, every 1 million extra smartphones Moto sells will produce another $50 million in net income, or 17 cents per diluted share on an annual basis, she estimates. She’s currently modeling the company selling 20.4 million units of smartphones this year, out of a total of 42.5 million units, which includes tablet computers (“Xoom“) and feature phones.
Moto shares today rose 30 cents, or 1%, to $24.94.
Copyright 2011 Dow Jones & Company, |
