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At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

Motorola morphs
When the-company-that-was-Motorola split into two stocks last week, Wall Street roared its approval … for half the company. Newly formed Motorola Solutions (NYSE: MSI  ) received a smattering of mostly "neutral" ratings from the likes of Barclays, Hudson Securities, and Calyon. But Motorola Mobility (NYSE: MMI  ) ? That one debuted to near-universal acclaim on the Street. With the rare exception of Deutsche Bank, the same folks who've yawned at the boring ol' radios and handheld scanners biz run by Motorola Solutions, have praised Motorola's Mobility, predicting great things for the money-losing cellphones-and-DVRs unit.

As you might expect, the lack of "professional" enthusiasm has been a drag on Motorola Solutions' stock lately, even as Motorola Mobility's stock has taken off like a rocket. And the cheering got louder this morning. This morning, you see, Bank of America added its vote of confidence in Motorola Mobility (MM). While citing a likely 30% to 40% growth in the smartphone market this year, B of A noted:

  • MM's leading position in smartphones running on Google's (Nasdaq: GOOG  ) Android software system.
  • The "substantial opportunity" to earn additional revenues from tablet PC sales such as the new Xoom (which fellow Fool Rick Munarriz has suggested just might turn out to be the tablet that knocks Apple off its pedestal).
  • Potential market share gains in Latin America, China, and Europe.
  • And rising profit margins.

With that, B of A announced that of the two "Motorolas," MM is the one it likes best. B of A predicts the stock will rise 20% from today's price to hit $38 by year-end -- and says you should buy the stock today. Predictably, MM's stock has been a strong performer

Bunk of a buy rating
I've got just one answer to Wall Street's optimism about Motorola Mobility: "Bunk." You see, when Wall Street stampedes in one direction, that's when this Fool takes the cue to step out of the way, and check out what's going on in the other direction. And maybe I'm crazy, but from my perspective the real value play today is not in MM, but in MS, Motorola Solutions.

Why? First of all, because the optimism over MM seems unwarranted. I mean, seriously, folks: What has you thinking that MM is going to rush right out and grab smartphone market share all of a sudden? The company's been a perennial underperformer in the cell phone wars. And while it's true the Droid line of smartphones looks hot, so too are all the other Android knockoffs.

Likewise with tablets. You like the Xoom? Great. But what do you think about the other 80 tablets (literally!) that debuted at last week's Consumer Electronics Show? Isn't it just possible that Research In Motion (Nasdaq: RIMM  ) , Hewlett-Packard (NYSE: HPQ  ) , or even Cisco (Nasdaq: CSCO  ) might grab a few of those gimme-something-that's-not-an-iPad tablet sales? For that matter, BMO Capital noted yesterday that when you add up all the Android tablet sales likely to take place this year, combined they're only likely to equal Apple's (Nasdaq: AAPL  ) iPad sales. If investing in tablet PCs is your game, doesn't it make more sense to buy the company that's going to equal the sales of the biggest competitors combined?

Mighty morphin' Moto-rangers
If you ask me, it sure makes more sense than buying the company that, if it had been independent, would have failed to earn a profit for the past four years (according to its SEC spinoff filings.)

No, if you ask me the much smarter play here is to take a look at the company to which Wall Street has turned a blind eye: Motorola Solutions. Here you have a company that is profitable, generates more than three times the annual free cash flow of its sibling, sells for less than seven times the amount of that free cash flow, and boasts $5.5 billion in net cash on its balance sheet.

Call me a value investor, call me a Fool, but to me this looks like a great time to not follow Wall Street's advice. To instead take a good hard look at the "Motorola" that Wall Street is scorning. I think you'll like what you see.

Rich Smith owns shares of Google. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 725 out of more than 170,000 members. The Motley Fool has a disclosure policy.

Google is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor pick. The Fool has written puts on Apple. The Fool has created a bull call spread position on Cisco. The Fool owns shares of Apple, and Google. Motley Fool Alpha owns shares of Cisco. (Can you tell we like tech?)

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Read/Post Comments (2) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 11, 2011, at 9:04 PM, SUPERMANSTOCKS wrote:

    I am thinking that MSI is a good play, however, it is business as usual for that section of Motorola. As far as MMI goes, I see growth and expansion with the Internet expanding and growing. The entire semi-conductor sector has boomed. Look at ENTG, ONNN and several others and you will see what I am talking about. I see MMI @ 45.00 to 47.00 by years end, however, that is just one guys opinion.

  • Report this Comment On January 12, 2011, at 12:38 PM, TMFDitty wrote:

    @SUPERMANSTOCKS: "...however, that is just one guys opinion."

    Hey -- so is mine. Thanks for sharing.


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