Hudson Securities Initiates Coverage Of Motorola Mobility With A Buy Rating

Hudson Sescurities is initiating coverage of Motorola Mobility

with a Buy rating and a $35.00 price target. For the upcoming 4Q10, MOT recently commented that it was comfortable with the high end of its guidance for Smartphone shipments of 12-14MM units for the year (we are at 13.8MM). At the same time, management noted that it expects an operating loss in Mobile Devices in 1Q11, which is reflected in our estimates. Key risks include: the handset market has proven to be very competitive with new entrants entering and exiting this market. There is nervousness surrounding the likely launch of a CDMA-based iPhone at Verizon, one of MMI's largest customers. The $35 price target is based on a sum-of-the-parts valuation. We value the Handset business at a 0.5x 2011 EV/Sales, the Home business at 15X 2011 EPS of $0.61 and add in the $10.67/share in cash.