Smart Phones Go Mass Market In 2010, J.P. Morgan Says

In a major call on the handset and telecom equipment sectors, J.P. Morgan analyst Rod Hall this morning declared that 2010 is the first year for “true mass-market adoption” of smart phones. While pricing is likely to drop, he says that price elasticity is high, which “bodes well for industry health.” In particular, he is bullish on “competitors that integrate hardware and software.” (Like Apple (AAPL), a company not directly addressed in his report.)

Hall made a series of related stock calls:

• Qualcomm (QCOM): He picks up coverage with an Outperform rating and $48 target. “Qualcomm is well positioned to benefit from growth in smart phones given the strength of both its royalty and semiconductor businesses,” he writes.
• Motorola (MOT): He launches with an Underweight rating. While the company’s focus on Android phones “appear promising,” he thinks that vertically integrated players are likely to fare better than than those like MOT that rely on an OS from a third party. He sets a $6 price target.
• Nokia (NOK): Upgraded to Overweight from Neutral, with a target of $19. “The value in the smart phone market is shifting to lower price points…where Nokia’s positioning is strong,” he writes.
• Research In Motion (RIMM): Upgraded to Overweight from Neutral, with a target of $84, up from $70. Hall writes that “RIMM is well-positioned…as it shifts focus to lower-ASP products like the Curve and to emerging markets, it is likely to create value.”
• Palm (PALM): Neutral rating maintained. “Palm’s fate is likely to rest on another hit product this year and improve of distribution effectiveness,” he writes. Hall notes that the company’s vertical market “plays into” his preference for integrated providers.
• Ericsson (ERIC): He maintains an Underweight rating, setting a $9.50 price target. He expects “another weak year of mobile infrastructure earnings.”

In today’s trading:

• QCOM is down 33 cents, or 0.8%, to $41.86.
• MOT is off 3 cents, or 0.4%, at $7.20.
• NOK is up 32 cents, or 2.1%, to $15.52.
• RIMM is up $1.74, or 2.4%, to $75.21.
• PALM is up 9 cents, or 2.5%, to $3.80.
• ERIC is up 4 cents, or 0.4%, to $10.13.