Palm Inc Up 5% After Two Firms Start Coverage
Dow Jones Newswires
No further information is available at this time.
No further information is available at this time.
By Donna Fuscaldo
Of DOW JONES NEWSWIRES
NEW YORK -- Shares of Palm Inc. (PALM) rose about 5% in Thursday after two investment firms, Goldman Sachs & Co. and Pacific Crest Securities, initiated coverage.
Goldman Sachs analyst Vik Mehta started Palm on its Recommended List and set a price target of $55.
In a research note issued Thursday, the analyst said Palm is an "undisputed leader" in the handheld computing devices market.
Mehta started coverage of the New York company because it is developing an enterprise strategy and is focusing on licensing its operating system to other device manufacturers.
According to Mehta, the Palm OS platform is being used by International Business Machines Corp. (IBM), Qualcomm Inc. (QCOM), and Handspring Inc. (HAND), as well as other vendors.
The analyst also said in his note that Palm's strategy of forming relationships with vendors enables the company to reach customers more effectively.
He pointed to an alliance with Dell Computer Corp. (DELL) in which Palm is able to give a larger line of Palm products to its customers using Dell's direct sales channel and its e-commerce web site.
Mehta also likes Palm because of the "possibilities of communications being integrated with PDA functionality." According to Mehta, over time Palm will integrate voice communications into other devices.
"Unlike most other niche competitors, Palm is the only company that is able to control the full user experience, ranging from hardware to software and services," said Mehta. "As standards in the burgeoning mobile Internet market continue to change, Palm can leverage its dominant market position with component manufactures, software developers and content creators to provide the most compelling service."
Shares of Palm were recently trading up 5.1%, or $1.94, at $39.88 on volume of 6.7 million compared with average daily volume of 7.4 million.
Pacific Crest Securities analyst James Faucette said he initiated coverage of Palm with a buy rating because the company has been an "outstanding brand franchise" with a "commanding market share position." Quoting PC Data, the analyst said Palm OS-based devices account for nearly 90% of PDA sales in July.
In addition to its market position, Faucette likes Palm because its licensing and services offer "promise of increased profitability" and because its OS platform has nearly 100,000 application developers.
"No other PDA OS has close to the number of developers as Palm, giving the company a large head start in the race to establish a Windows-like standard operating system for PDAs."
Faucette is forecasting that Palm will grow 50% annually over the next five years.
"While the stock has risen slightly since it was completely spun off from 3Com," Faucette said. "We believe the market potential, strong development program and dedicated customers and developer base and outstanding growth warrant a premium valuation."
Officials at Palm weren't immediately available for comment.
-By Donna Fuscaldo, Dow Jones Newswires; 201-938-5253; donna.fuscaldo@dowjones.com |
