Motorola Solutions Inc MSI holds a leading position in the $9 billion a year Land Mobile Radio (LMR) market, with 60-70 percent share.
Citi’s Stanley Kovler initiated coverage of the company with a Neutral rating and price target of $73.
Leading Position
Kovler mentioned Motorola Solutions’ leadership position in LMR, along with its Public Safety communications services, “supports stable low to mid-single digit growth heading into 2018 once the “air pocket” of the limited LTE-related public service rev rec in 2016 / 2017 converts to revenue growth in 2018.”
The analyst also noted that given the limited EPS upside in the near term, apart from the residual cash return authorization, which is expected to level off, the stock’s risk/reward remains balanced.
Potential Drivers
According to the Citi report, “Underlying drivers of Public Safety spending provide stable fundamentals for MSI, with more predictable earnings owing to greater Managed Services business that now comprises ~25 percent of revenue.”
Kovler also believes Motorola Solutions is well positioned to benefit from longer-term upgrades and service revenue from Public Safety LTE network builds, integration with existing LMR networks, new device sales, as well as growing demand for software, new video services, and services associated with Smart Public Safety.
“We also believe MSI’s long-standing cash return story is close to leveling off to steadier state.” Kovler said.
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