On Thursday, BofA Securities expressed a positive outlook on Motorola Solutions Inc. (NYSE: NYSE:MSI) stock, increasing the price target to $440 from the previous $370 while maintaining a Buy rating.
The firm highlighted the rapid growth of the company's video security segment, which has seen a compound annual growth rate (CAGR) of 35.2% from 2018 to 2023. The software component of this segment has grown even faster, with a CAGR of 56.5%.
The firm's analysis points to the expectation that video security revenue will make up approximately 18% of Motorola Solutions' total revenue in 2024, marking a year-over-year increase of around 10%.
Despite this growth, the segment is projected to capture only 7.3% of the total addressable market (TAM), which is valued at $26 billion. This suggests there is significant room for Motorola to increase its market share through upselling and cross-selling opportunities.
The revision of the price target to $440 is based on a forward price-to-earnings (P/E) multiple of around 31 times the estimated earnings for 2025, up from the previously used multiple of 26 times. BofA Securities' stance is that Motorola's continued expansion into video security and software will provide avenues for consistent revenue growth and margin expansion.
The firm's reiteration of the Buy rating indicates confidence in Motorola Solutions' strategic direction and its ability to capitalize on the expanding opportunities within the video security market. The new price target reflects the firm's assessment of the company's future financial performance and market position.
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