Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high

Motorola. (MOT) From April 2005 to October 2006, Motorola’s share rose from under $15 to over $26. The market started to get nervous about the shares and by the turn of the year they were below $21. The MOT announced that its Q4 would be weak and all hell broke loose. The stock dropped as low as $18.

There is a segment of investors on Wall St. who make a lot of money buy buying out of favor stocks. They have the "Dogs of the Dow" mentality. If a pretty good company gets hammered, buy the stock. It will probably go up. It can be a dangerous game.

With sale of its flagship RAZR slowing and its revenue per phone falling as it battle Nokia for share and customers in developing markets look for cheaper phones, Motorola is in a bind. The company’s CEO says the way out is offering phones with the capacity to offer more services. Those phones should fetch a better price. To move into that game, Motorola has set up deals with Microsoft and Yahoo! The arrangements will put search and information features onto more phones and will add MSFT digital right management software to make media downloads more secure.

But, software deals are not going to get it done, not by themselves at least. Nokia is coming out with a new slim multimedia phone to go after MOT’s RAZR.

While it is difficult to say what mobile handset sales will look like in five or ten years, there is one large consumer trend that plays in Motola’s favor. That is that the penetration of cell phone owners in markets like China could still rise sharply. As the world’s No.2 provider of handsets, Motorola should get more than its share of those sales. If it can hold revenue per phone steady, it may well get back its bounce.

Motorola also has some other key units that could kick in growth. It set-top box division should benefit from the larger and larger numbers of digital television homes. The companies large telecom infrastructure equipment business should also do well as data, voice and video traffic increases.

Factors that could move stock above forecast price: The market is looking for Motorola’s handset business to have margins as low as the single digits. Anything better would help the shares. It sales in emerging markets grow without the units being extremely low-revenue-per-handset, Wall St. could warm to the share again.

Factors that could push the stock below forecast: Another warning on margins.

Douglas A. McIntyre can be reached at [email protected]. He does not own securites in companies that he writes about.

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