Still leery of Motorola (MOT)? Join the crowd. Wall Street remains skeptical about how the world's third-largest wireless handset maker can survive the fierce battle in the high-end market against Apple's (AAPL) touch-screen iPhone and Research in Motion's (RIMM) BlackBerry. But some analysts are starting to embrace the idea that the beleaguered technology giant is finally turning the corner after returning to profitability—barely—in the second quarter. Motorola's earnings of 2 a share on sales of $8.1 billion surprised the Street—analysts had expected a loss on sales of less than $8 billion.
To be sure, the notion that Motorola is on its way to recovery, after reporting a string of quarterly losses for more than a year, is still a minority view among analysts. But the opportune time to turn optimistic may be now, when the Street is still skeptical. Of the 34 analysts who follow Motorola, 21 remain neutral on the stock and two recommend selling it. Only nine of the 34 dare rate it a buy.
And so the stock remains in limbo, trading at 9 a share, down from its 52-week high of 19.68 on Oct. 25, 2007, even though the company eked out a profit. What will get analysts to change their calls on Motorola? Most are waiting for more evidence of a sustained return to profitability. The stock's fortunes will take a turn for the better when institutional investors realize the shares have become too oversold to resist. And that's when the stock will begin shooting up. By then, however, it may be a bit late for individual investors to bag the big gains.
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