Palm shares rise after Morgan Joseph upgrade

AP News
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Posted: Dec 21, 2009 1:41 PM

Palm Inc. shares rose Monday after a Morgan Joseph analyst upgraded the smart phone maker following a recent drop in stock price.

Palm shares climbed 36 cents, or 3.5 percent, to $10.53 in afternoon trading.

Morgan Joseph analyst Ilya Grozovsky upgraded Palm to "Hold" from "Sell," though he said he is skeptical that the company can meet its sales forecast for its fiscal year ending in May.

Palm, which launched the Pre and Pixi smart phones this year as a part of its turnaround effort, is aiming for revenue of $1.6 billion to $1.8 billion.

Grozovsky said that with the recent drop in stock price, investors are pricing in too much of a discount to compensate for a likely shortfall. The stock has fallen nearly 30 percent since the company issued its forecast in September.

Still, Grozovsky said he remains concerned by competition from the BlackBerry by Research in Motion Ltd., Apple Inc.'s iPhone and the slew of new phones based on Google Inc.'s Android operating system.

He said Palm's rivals all "offer significant competition, in our view, and stronger balance sheets to fund major marketing initiatives."

Palm booked a bigger-than-expected loss for its fiscal second quarter last week on a 59 percent slide in revenue. Meanwhile, Research in Motion posted a 59 percent jump in profit, fueled by strong BlackBerry sales.