Motorola Solutions (NYSE:MSI) shares rose nearly 2% in premarket trading on Thursday as investment firm J.P. Morgan upgraded the telecommunications equipment company, citing recent weakness in the stock.
Analyst Paul Chung moved his rating on Motorola Solutions (MSI) shares to overweight from neutral, noting that visibility is “high” due to the record backlog (which is expected to see conversions accelerate) and the public safety market has been more “resilient” compared to other markets due to favorable government funding levels.
Additionally, the company’s Land Mobile Radio is seeing “strong demand” for the next upgrade cycle. Chung noted that the company’s COO, Jack Molloy, spoke at a recent investor conference and said that less than 10% of APX NEXT customers have upgraded so the company is expected to see volume growth and price increases.
The company’s new Avigilon physical security suite launched this week, bringing together five years worth of acquisitions.
Lastly, the company’s financial position is expected to strengthen this year, due to rising gross margins, better free cash flow and a capital structure that is seen as being in “excellent shape.”
“The firm’s competitive position in the market, ability to tack on acquisitions to broaden product offering, high-quality of earnings with very strong [free cash flow], along with increased transparency of reporting, warrant a premium to historical multiples, in our view,” Chung wrote in an investor note, adding he expects Motorola Solutions (MSI) stock to outperform over the next 12 months.
In addition to the upgrade, Chung slightly raised his per-share price target on Motorola Solutions (MSI) stock to $305, up from a previous target of $300.
Last month, Motorola Solutions (MSI) declared its quarterly dividend of 88 cents per share, payable to shareholders of record as of March 15 on April 14.
Analysts are mostly bullish on Motorola Solutions (MSI). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates MSI a HOLD.