Mobile Phones account for about 30% of Motorola’s (NYSE:MOT) stock meaning that Motorola is heavily impacted by the average price at which it sells its mobile phones as well as its share within the broader mobile phone market.
The most lucrative segment of the mobile phone market, smartphones, is dominated by players like Nokia (NYSE:NOK), Apple (NASDAQ:AAPL), Research in Motion (NASDAQ:RIMM) and recently introduced phones based on Google’s (NASDAQ:GOOG) Android operating system.
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We currently have a Trefis price estimate of $9.08 for Motorola’s stock, about 11% above the current market price of $8.15. Lower Motorola smartphone prices could help spur gains in Motorola’s mobile market share; however, such pricing may eventually be matched by competitors and the overall lower prices of smartphones could potentially hurt Motorola.
Motorola’s average mobile phone pricing decreased from $147 in 2005 to $130 in 2008 before rebounding to an estimated $214 in 2009 as a result of a higher mix of smartphones. 27% of Motorola’s mobiles phones were smartphones in Q1 2010, and this figure increased to 42% in Q3 2010.
The average forecasts for Motorola Mobile Phone Pricing created by Trefis members indicates a projected increase from $214 in 2010 to $249 by 2016, compared to the baseline Trefis estimate of an increase from $214 in 2010 to $231 by 2016. The member estimates imply an upside of 2% to the Trefis price estimate for Motorola’s stock.
In contrast to the average Trefis member estimate, there could be a downside of 13% to the Trefis price estimate for Motorola if the company’s average mobile phone pricing were to reach $100 by the end of the Trefis forecast period as result of faster commoditization of smartphones.
However, lower Motorola smartphone prices could help the company if it is able to beat the competition on pricing, attracting a wider set of smartphone buyers and driving up Motorola’s mobile phone market share. The Trefis price estimate for Motorola’s stock could double to $18 if the company can achieve 9% market share by the end of the Trefis forecast period.
You can modify the forecast below to see the sensitivity of Motorola’s stock to mobile phone market share.