|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.
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