Mobile Market Share is Critical to Motorola’s Stock Value

Motorola (NYSE:MOT), which competes with Apple (NASDAQ:AAPL), Research in Motion (NASDAQ:RIMM) and Nokia (NYSE:NOK) in the mobile phone market, has watched its market share rapidly deteriorate since reaching 22% in 2006. As of 2009, Motorola’s estimated mobile phone market share stood below 5%, and we project further declines to under 2% by the end of our forecast period.

We estimate that Motorola’s mobile phone operations generate roughly 29% of the company’s stock value. Our price estimate for Motorola is $8.30, roughly 8% below market price.

Mobile Phone Market Share is a Key Driver to Motorola’s Stock Value

Mobile phone market share remains the most critical driver to Motorola,  as this segment generates the largest single contribution to the company’s estimated stock value (at 29%). As a result, small swings in projected market share create large fluctuations in Motorola’s intrinsic value. Below we examine potential upside and downside scenarios for Motorola stemming from this key driver.

[trefis_forecast ticker=”MOT” driver=”5226″]

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-10% downside – Market Share Loss

Although Motorola has launched more than 20 smartphones in 2010, its market share continues to slip. An increased mix of smartphones in Motorola’s product offerings helps the company maintain high profit margins, although market share hasn’t seen the same upside due to increased competition.

We expect that Motorola’s mobile phone market share will fall below 3% in 2010, [1] and will continue to slide below 2% by the end of our forecast period. There could be a downside of 10% to our price estimate for Motorola’s stock if its market share sees a more pronounced decline and falls below 1% by the end of our forecast period.

+15% upside – Market Share Gain

Although we expect Motorola to lose market share in the future, its stock price could get a tremendous lift if it is able to maintain its modest mobile phone market share of around 3% going forward. This scenario could create upside of 15% to our price estimate for Motorola, pushing our price estimate ahead of the stock’s current market price (our price estimate is 8% below market price).

Drag the trend-line in the chart above to see the impact of various mobile phone market share scenarios on Motorola’s stock value.

You can see the complete $8.30 Trefis Price estimate for Motorola stock here.

  1. Estimated from the quarterly filings of the first three quarters of 2010 []