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VIDEOShould Investors Bet Big on Motorola?
By
Michael Comeau
Aug 30, 2010 9:40 am
In the past 30 days, 20 analysts have raised their full-year earnings estimates on Motorola -- a positive trend for a stock that isn't loved, but should be.
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The rise of Google’s (GOOG) Android smartphone operating system is no exception. Android’s success is largely due to the market needing a high-quality iPhone alternative. While Android isn’t destroying the iPhone, it does, in my opinion, represent the only real competition to Apple’s dominance.
That’s something I want to invest in.
The Android Boom, by the Numbers
According to Gartner, Android’s market share hit 17.2% in the second quarter, up from just 1.8% in the year-ago period. That momentum has continued into the third quarter, as Google CEO Eric Schmidt said that the company is activating 200,000 Android phones per day, up from 160,000 in June. Plus, many key Android phones, including Motorola’s (MOT) own Droid X, remain out of stock at wireless carriers.
But when talking stocks, Android plays are few and far between on the long side. I may be in the minority, but I worry quite a bit about social media taking a chunk out of Google’s advertising business.
That shifted my research toward mobile-device makers, leading me to enter my first buy order for a slug of Motorola common stock.
Essentially I’m betting that Motorola’s Android-centric smartphone strategy, which revolves around its line of Droid phones, will drive its market-share numbers out of the cellar. As profits continue to rise and sentiment toward the company improves, the stock should come along for the ride.
Every Motorola Droid phone has been a hit with consumers, creating a brand that’s strong enough to extend the company’s smartphone strength into tablets -- a future key market for Android.
Windows Phone 7 Positioning
A recent report from TechCrunch suggested that Microsoft (MSFT) could spend $500 million or more to support the upcoming launch of its Windows Phone 7 operating system. Unfortunately, Windows Phone 7 is at least two years too late, allowing Android to slide in to supply a commodity but high-quality alternative to Apple’s iPhone.
Motorola is highly focused on Android, but can more than likely port its Droid phones to Windows Phone 7 should the OS take off in a big way. That’s an ideal position given the massive uncertainty surrounding Microsoft’s latest mobile push and Android’s ongoing success.
Wall Street’s Expectations
As it stands now, the Wall Street analyst community has 18 buy ratings on Motorola, with 15 Holds and a single Sell. Darling Apple boasts 56 buys, three holds, and one sell.
However, in the past 30 days, 20 analysts have raised their full-year earnings estimates on Motorola -- a positive trend for a stock that clearly isn’t loved, but should be.
Positions in AAPL, MOT.
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