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From: Bill Wolf5/11/2011 8:22:38 AM
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Playing Motorola's New Smartphone Stock

By BOB O'BRIEN
The four-month-old stock has a peer-industry multiple but outsize earnings-growth expectations.

There are no second acts in American lives, F. Scott Fitzgerald once insisted. But don't tell that to the executives at Motorola Mobility Holdings (ticker: MMI), the spinoff company now responsible for the latest generation of Motorola smartphones.

Once a dominant name in the cellphone industry, Motorola became known for not keeping up with the times. Successful product innovations like the StarTac and the Razr were followed by duds -- and periods of unprofitability to match.

Motorola Mobility Holdings (MMI)
[B-TRA-MMI-0510]
Stock Price: $25.56
52-Week High: $36.54
52-Week Low: $22.56
Market Cap: $ 7.4 billion
Est. 2011 EPS: $ 0.80 per share
2011 P/E: 31 times
Est. Long-Term EPS Growth:* 7%
Est. ('11/'10) EPS Growth: N/A
Revenue (trailing 12 months): $13 billion
Dividend Yield: None
CEO: Sanjay K. Jha
Headquarters: Libertyville, Ill.

* Based on analyst estimates looking ahead three to five years.
Sources: Thomson Reuters

And critics of the newly cast mobile-phone company have reasons to wonder if this new company is the same old Motorola phone division in a new dress.

After all, the stock, which launched in early January, had a nice run-up before falling back to earth. It's slightly down from the price it commanded when it split from the rest of Motorola, an entity now called Motorola Solutions (MSI).

But bulls say Motorola Mobility is once again snatching victory from the jaws of defeat. And they may be on to something: With 27 smartphone models, it's selling feature-laden handsets at premium prices. Its average mobile-phone price in the first quarter reached $229, up from an ASP (average selling price) of $130 in 2009. It sold more than four million smartphones in the first quarter of this year, up 78% year-over-year, while shipping a higher-than-expected 250,000 units of the tablet product it introduced this year.

Trading at 14 times next year's earnings, it has got essentially a peer multiple, even though Wall Street's long-term earnings-per-share growth estimates are high for the sector. Analysts project there's at least 25% more upside over the next several months – Tero Kuittinen, who covers mobile devices at MKM Partners, puts the price target at $35 for this $25.54 stock.

"This is a company that's made some pretty bold moves over the last two years," says Kuittinen, who has a Buy rating on the stock.

Later this week, Motorola Mobility will roll out the Droid X2, its key product launch for the spring, which is aimed at the Verizon Communications (VZ) network. That will complement its existing relationship in North America with AT&T (T).

Motorola Mobility has beefed up its presence in critical international markets, having gotten its Atrix smartphone on the Orange U.K. platform ahead of rivals from Korea making comparable products. Networks in Brazil have lavished promotional backing on the Atrix, continuing the company's already-strong Latin American momentum. Its non-North American sales now account for 50% of activity, up from 25% in just one year.

"The driver of this growth, we believe, is continued traction at AT&T as well as international expansion in markets such as China and Latin America, which is increasingly becoming evident," Credit Suisse mobile analysts wrote in a recent report.

Meanwhile, the bulls insist that investors aren't giving enough credit to Motorola Mobility's home-electronics business, which manufactures set-top boxes and DVRs, and contributed $903 million in revenue last quarter, nearly one-third of sales. The share price also doesn't fully reflect the market value of the nearly 17,000 patents that Motorola Mobility holds. Intellectual property can be a valuable asset when used strategically.

Skeptics rightly note that Motorola still flubs new-product rollouts. Last month, the company said it plans to delay the launch of its first 4G smartphone, the Droid Bionic, possibly until later this summer. Analysts expect the handset market to put a premium on nimble product launches. Because so many smartphone manufacturers use Google's Android operating system, there's a lot of "me, too" products available.

As a result, product cycles are likely to shorten, and handset makers are going to have to develop a reliable pipeline. The ubiquity of the Android pipeline lowers barriers to entry – Google gives Android away – and gives both carriers and consumers leverage.

There are also questions about Motorola's push into the tablet market: One analyst from a boutique research operation excoriated the Xoom as "an epic flop."

Ultimately, though, Motorola couldn't afford to cede the tablet market to Apple and the host of rivals flooding in, lest it be accused of missing another product cycle. "If Motorola doesn't compete in tablets, they'd be taking a huge risk," insists MKM's Kuittinen.

"We continue to be positive on Motorola Mobility in light of its strong product momentum this month," Kuittinen says.

Given the share's reasonable price, we're inclined to go with him on this.
Full Disclosure

•MKM Partners has a Buy rating and a $35 price target on Motorola Mobility Holdings.

•Credit Suisse has an Outperform rating and a $31 price target on Motorola Mobility. The firm has performed investment banking services to Motorola within the last 12 months.

E-mail: bob.obrien@barrons.com

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From: Bill Wolf5/11/2011 4:17:33 PM
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MMI: Needham Starts at Hold; How Soon A Commodity?
By Tiernan Ray

Charlie Wolf of Needham & Co., who last week cut his rating on Research in Motion (RIMM) to Hold for its failure to maintain competitive products, today initiated coverage of Motorola Mobility (MMI) with a Hold rating, writing that Moto’s strategy of riding Google’s (GOOG) “Android” coat-tails could become increasingly risky this year.

There are two risks, as he sees it: there will be a proliferation of smartphone licensees of Android (some would say there are already a plethora), and, closely tied to that, there is a risk that Moto won’t be able to sufficiently differentiate itself as Android devices become commodities.

Moreover, he sees the same risk to Moto’s efforts with Android tablets, despite the fact that its “Xoom” tablet has gotten positive reviews so far.

“Since Android phones run on the same operating system, the major risk facing Motorola and the other licensees is the Android platform could commoditize, sending margins into value-destroying territories.”

Because smartphone growth is exploding, and because the devices are sold through carriers, subsidies have kept Android from commoditizing — meaning, no one buys them on price alone, he implies. As smartphone growth slows, Wolf expects carriers to press Moto and other vendors for lower prices on a wholesale basis.

He notes, “Google has licensed Android to over 40 manufacturers; and the only option for many second-tier licensees, located in emerging markets, is to capture share through aggressive pricing rather than differentiating features and services.”

On the strength of 20% revenue growth, Motorola Mobility should earn $0.85 in 2011 as the company leverages the fixed components in its expense structure. We do not anticipate that Motorola Mobility will experience smartphone sales shortfalls or increasing margin pressures in 2011 because the Android platform itself is growing so rapidly. However, 2012 could be a different story. We expect Motorola Mobility’s revenue growth to slow to 15% in that year. We also expect that pricing and gross margin pressures will begin to emerge as growth in the Android platform slows. With little additional leverage available in its expense structure, Motorola Mobility’s 2012 earnings should rise modestly to $1.10 per share.

I would note Wolf’s estimate is higher than the 80 cents analysts are estimating this year, but the 2012 figure for $1.10 is well below the consensus $1.70.

Moto shares today are down 41 cents, or 1.6%, at $25.13.

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

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To: Bill Wolf who wrote (3408)5/12/2011 7:58:38 AM
From: JakeStraw
   of 3431
 
>>“Since Android phones run on the same operating system, the major risk facing Motorola and the other licensees is the Android platform could commoditize, sending >>margins into value-destroying territories.”

I think that's a given...

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From: Bill Wolf5/27/2011 5:39:49 PM
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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,

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From: JakeStraw6/21/2011 2:47:41 PM
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Credit Suisse analysts downgraded shares of Motorola Mobility (NYSE: MMI) to an "underperform"

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From: Bill Wolf6/21/2011 6:28:48 PM
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Moto: Buy, Says Gabelli, Android Strategy Can Work
By Tiernan Ray

Folks, lost in the shuffle earlier today was a research note from Gabelli & Co.’s Hendi Susanto offering a rare favorable view of Motorola Mobility (MMI), which has been taking quite a few knocks of late, including this morning’s downgrade to Underperform by Credit Suisse.

Susanto argues that the turnaround effort, based on riding the wave of Google’s (GOOG) “Android” software, is working.

“We continue to see progress on MMI’s turn-around which is centered on its partnership with Google,” writes Susanto. “This partnership has enabled the company to accelerate product development and establish a stronger product portfolio with advanced technical specifications such as LTE.”

Susanto who rates the stock Buy, has a $31 price target on the stock, using a 7 times multiple of enterprise value to Ebitda for both the mobile devices and the home networking business.

Susento has a fairly optimistic picture of Motorola’s return to profit in its handset business: from a loss of $76 million in Ebitda last year, the company may bounce back to $310 million in positive Ebitda this year, and $475 million next year. Credit Suisse’s Kulbinder Garcha this morning had forecast just $80 million this year and $400 million next year.

That’s based on a higher estimate of how many smartphones the company will ship this year: 21 million units, versus Garcha’s roughly 19.4 million-unit estimate. The company’s goal of as many as 23 million units, when including its tablet computer projections, is realistic, in Susanto’s view.

Moto may see its smartphone market share rise from 4.5% last year to 4.7% this year, 4.8% next year, and 5% by 2013, Susanto thinks.

Garcha sees $1.10 in non-GAAP EPS this year, well above the average 78 cents estimate, based on revenue of $14.03 billion, ahead of the average $13.4 billion estimate.

MMI stock today fell 70 cents, or almost 3%, to $23.79.

Copyright 2011 Dow Jones & Company,

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From: Bill Wolf6/22/2011 6:12:09 PM
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2 Buys and 1 Sell From Private Capital Management's Mutual Funds


Technology sector: Buy Motorola Mobility Holdings (MMI). PCM added $40 million to its $540 million position from the previous quarter, including adding a new $21 million position in SAIC Inc. (SAI), a provider of scientific engineering system integration and technical services, primarily to U.S. government entities. a new $23 million position in Motorola Mobility Holdings (MMI), a manufacturer of wireless handsets, set-top boxes and video distribution systems for home, network and telecom markets. MMI is an attractive buy as it trades at a forward 15 price-to-earnings (P/E) based on fiscal year 2012 earnings, and it is projected to grow revenue and margins strongly in the near term. Furthermore, analyst targets for MMI are in the mid-$30s to $40 range. BMC trades at a forward 16 P/E, which is mid-range based on its historic P/E range. It has been up strongly 60% in the last year while revenues and earnings are up only in the teens.


seekingalpha.com

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From: JakeStraw6/28/2011 2:43:04 PM
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BMO Capital Markets analysts downgraded shares of Motorola Mobility (MMI) from a "market perform" rating to an "underperform" rating.

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From: Bill Wolf7/21/2011 1:46:20 PM
   of 3431
 
Surprising Price Movement Found In Shares Of (NYSE: MMI)



Motorola Mobility Holdings, Inc. (NYSE: MMI): traded higher by 20.08% or $4.50/share to $26.91 In the past year, the shares have traded as low as $20.77 and as high as $36.54. On average, 3344260 shares of MMI exchange hands on a given day and today's volume is recorded at 8414100. The shares are currently trading above the 200-day moving average which indicates that the shares have been subject to upward momentum. The 200 DMA is above the 50 DMA which indicates that the stock has likely taken a dip in the shorter term. The stock may eventually drop to test the 200-day moving average where buyers may be lurking near the $26.2524 area.

takeoverchatter.com

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To: Bill Wolf who wrote (3415)7/21/2011 2:12:44 PM
From: JakeStraw
   of 3431
 
Motorola Mobility shares jump on Icahn filing
marketwatch.com

The filing stated that Icahn believes the company's patent portfolio "which is substantially larger than Nortel Networks' and includes numerous patents concerning 4G technologies, has significant value."

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