Motorola (NYSE:MOT) Good Short Term, MMI (NYSE:MI ) Undervalued Says Gleacher

Commenting on Motorola (NYSE:MOT) and MMI (NYSE:MI), which began trading "when issued" on Friday, Gleacher says they see the share price of Motorola as being strong in the immediate short term, and MMI as being undervalued.

Gleacher said, "MOT's separated stocks MSI (Motorola Solutions - the old EMS) and MMI (Motorola Mobility - Handsets and Home) began trading "when issued" on Friday with the official distribution slated for January 4, pre-open. The MOT stock will continue to trade until January 4. We continue to like MOT here and reiterate our $10 target. Based on Friday's close, we believe MMI is undervalued and MMS is fairly valued. Key points to consider: 1) Estimating $1.10 on $12.4bil for MMI (Handsets) and $2.37 on $7.9bil for MMS (EMS) for CY11. Our preliminary estimates are based on our current MOT segment model, with minor changes to overhead and interest income based on net cash for the separate entities. We expect $3.5bil of net cash for MMI following the split and $3.85bil for MMS, including $1.45bil from the NSN networks sale expected to close in Q1."

"2) MMI will be more volatile but offers more upside potential. Sanjay Jha's Handset/Home group will be more volatile, subject to the highly competitive but large and high-growth smartphone market. At $25, MMI investors get $11.79/share in cash ($3.5bil), $2.4bil or 0.3x sales for handsets, and $1.5bil or 7.6x earnings for MOT's Home group. We see $1.40-$1.75 in longer-term EPS power for MMI."

3) We recommend buying MMI at current levels. Our $10 target for MOT corresponds to a $31 target for MMI, based on 0.7x our CY11 sales estimate plus cash, or 17.5x our CY11 EPS estimate plus cash."

Gleacher maintains their "Buy" rating on Motorola, which was trading at $8.79, down $0.09, or 1.01 percent, as of 12:17 PM EST. They have a price target of $10 on them.