Handset stocks at risk in a recession
Posted
Feb 07 2008, 03:45 PM
by
Kim Peterson
Handset companies who do business in North America will be hit hard in a recession, Citi analyst Jim Suva said in a note this morning. Suva takes a close look at Brightpoint, Motorola, Palm and Research in Motion, and calls out the latter as the stock that could "see the greatest damage to share price."
Suva writes that Research in Motion "faces double-barreled risk," according to Barron's, because of its strong presence in North America and its high P/E multiple (currently at 45.20). The stock could drop to $63 in a worst-case, global recession. RIMM shares closed today at $84.68.
Embattled Palm is very exposed in North America, and Suva thinks a recession could push shares down to $3 or $4 a share. Palm closed today at $5.99.
Sucks to be Motorola, who is doing so badly that a recession is last thing it needs, Suva wrote, adding that Motorola shares might drop 17% in a recession, to $9.50 or so from today's closing price of $11.37.
Brightpoint is a mobile phone distributor for carriers and retailers. While not exactly a handset stock, its shares could drop to $10 in a global recession, Suva writes. Brightpoint shares closed at $12.53 today.
Bottom line from Suva seems to be that any U.S. exposure would be bad in a recession. That could be good news for Nokia, which sold fewer than 4% of its 134 millon cell phones in North America last quarter, writes Silicon Alley Insider.
Note that Suva doesn't specifically say we're in a recession, though. He's writing about what would happen should a recession occur.
