Morgan Stanley upgraded Motorola Solutions (MSI) to Overweight, citing a significant valuation reset and improved long-term prospects. The move reflects growing confidence in the company's operational turnaround and capital allocation strategy.
- Morgan Stanley upgraded Motorola Solutions (MSI) to Overweight
- New price target set at $135, implying ~22% upside from Dec 20, 2025 close
- Forward P/E of 18x based on FY2026 earnings estimates
- Adjusted EBITDA projected to grow at 7% CAGR over next three years
- Free cash flow conversion reached 110% in Q3 2025
- Increased focus on software licensing and government contract wins
Motorola Solutions (MSI) has received an upgrade from Morgan Stanley, which reclassified the stock to Overweight following a comprehensive reassessment of its intrinsic value and growth trajectory. The firm believes the market has undervalued MSI’s core public safety and enterprise communications businesses, particularly given recent improvements in margin stability and R&D efficiency. The analyst assigned a new price target of $135 per share, representing approximately 22% upside from MSI’s closing price on December 20, 2025. This targets a forward P/E multiple of 18x based on fiscal year 2026 earnings estimates. Morgan Stanley noted that historical valuation discounts to peers have narrowed, reflecting stronger execution in digital infrastructure and software-driven revenue streams. Key metrics underpinning the upgrade include a projected 7% compound annual growth rate in adjusted EBITDA over the next three years, driven by recurring software licensing and expanded government contract wins. Additionally, the company’s free cash flow conversion ratio improved to 110% in Q3 2025, up from 95% in the same quarter the prior year. These indicators suggest enhanced financial discipline and scalability. The upgrade is likely to influence institutional investor positioning, with options activity and trading volume expected to rise in the coming weeks. Investors focused on industrial technology and public sector exposure may see MSI as a strategic addition amid shifting federal and municipal spending priorities.