JP Morgan Keeps Overweight on PalmOne

Analyst Paul Coster is keeping the stock on the Focus List

JP Morgan reiterated its overweight rating on PalmOne (PLMO ).

Analyst Paul Coster says the 32 cents proforma fourth-quarter EPS (GAAP earnings was 27 cents) on $267.3 million revenue beat his in-line estimate for 13 cents EPS on Street-high revenue of $266 million. He notes the 30.5% gross margin, fueled by sales of newer PDA models and a favorable GSM/CDMA mix of Treos, beat his forecast by 100 basis points. Operating expenses declined sequentially, which is a positive surprise.

Coster says the company is guiding to first-quarter EPS of 17 cents (vs. his 7 cents estimate), and sees fiscal 2005 (May) EPS of $1.30 to $1.45 (he had a 72 cents estimate). He notes management's commitment to proforma operating margins of 6.5% to 7.5% in fiscal 2005, vs. the 3% to 5% prior target. He raised the $26 target to $34.

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