Motorola: Smart(phone) Turnaround Trade
Motorola (MOT) is a future growth pure play in mobile, with its share price hampered by its poor past management and inconsistent history. The investment thesis for a long play in MOT is centered on the Android-based smartphone reaching a successful launch not seen since the RAZR revolutionized the mobile phone market in 2005. I arrive at a target price of $11.75, an upside of over 65%.
Motorola steered itself out of trouble in 2009 by improving its cash balance assets, cash flow, and by successfully launching 2 Android-based smartphones. In the final quarter (Q4/2009), Motorola unfortunately provided a disappointing outlook for the current quarter (Q1/2010). More importantly, its forecast for smartphone growth was adjusted downward. At the same time, Nokia (NOK), a stronger but comparable company to Motorola in terms of mobile phone/smartphone growth and to some degree, geographical dynamics, reported far better results.
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