Motorola shares look cheap, still risky
Despite hopes the worst could be over for Motorola Inc’s (MOT.N: Quote, Profile, Research) struggling cell-phone business, the company is still a risky bet, according to analysts who cite operational, economic and credit concerns.
Motorola shares, which have lost about 65 percent of their value in the last 18 months, may prove to be a bargain if the company shows sure signs of a recovery in the mobile phone unit. But this is not even a reasonably safe bet yet, based on the company’s most recent financial results and forecasts.
“We’re not really there yet from an investment point of view. Just because a stock is cheap it doesn’t necessarily mean it’s a bargain,” said RBC Capital analyst Mark Sue.
Based on his 2008 revenue estimate, Motorola’s share price of around $9.24 implies a 0.5 enterprise value-to-revenue ratio.
Citigroup credit analyst David Hamburger warned Motorola may even see a rating downgrade to junk status from investment grade as soon as a year from now, unless it logs strong improvements.
Motorola posted a wider quarterly loss on Thursday with weak cell-phone sales, particularly in its top North American market payday loan low fee http://paydayloans-on.com. The company that once wowed consumers with its slim Razr phone said its global market share had slid to less than 10 percent from a peak of 23 percent in late 2006.
In the meantime, bigger rivals Nokia Oyj (NOK1V.HE: Quote, Profile, Research), which has a 41 percent market share, Samsung Electronics Co Ltd (005930.KS: Quote, Profile, Research), which had a 16 percent share, and smaller rival LG Electronics (066570.KS: Quote, Profile, Research) all gained ground in the quarter.
“We’d rather own Nokia or Qualcomm or LG Electronics,” said Nomura analyst Richard Windsor. While Motorola may yet improve, “I don’t think you have to invest in it yet.”