Several firms are cautious on Palm (NASDAQ:PALM) following in-line results and disappointing guidance issued last night:
* Piper notes they were disappointed with management's FYQ107 guidance of revenue in the range of $380M-$385M and proforma EPS between $0.18-$0.19 vs. estimates of $412M and $0.23.
The lower-than-expected August quarter guidance was driven in part by the end of Treo 650 shipments into the European market starting on June 30, 2006, due to noncompliance with a regulatory issue, and firm's belief the Treo 700 for Europe is launching later than they anticipated. Management also indicated a longer-than-expected sales cycle with enterprise customers and competitive product launches from other major OEMs also impacted near-term guidance.
While Palm guided FY07 year-over-year revenue growth of 20%-25%, they remain cautious of competition impacting ASPs and have modeled 18% revenue growth for FY2007 and 13% revenue growth for FY2008. Maintains Market Perform and $19 tgt.
* Citigroup is lowering their tgt on PALM to $17 from $21. The price target of $17 is based on a P/E multiple of 18.5x CY07 EPS estimate (including stock option expenses) of $0.90 (versus prior estimate of $1.12). Firm believes a P/E-based approach better captures investors' focus on earnings. Maintains Hold.
* Bear Stearns notes that despite PALM's optimistic FY07 outlook underpinned by significant ramp in FY2H07, they are maintaining their pre-options estimates and Underperform rating given concerns about intensifying competition and potential ASP compression.
While PALM's positive FY07 outlook implies a robust FY2H07 growth driven by new product launches and Europe expansion, they are concerned that 1) smartphone market is becoming more crowded with lower-priced smartphones and 2) PALM faces challenges in Europe including entrenched competitors (NOK E61 and Samsung i320 are already ramping) and Treo brand is less known. As for valuation, theyare maintaining 2006 year-end fair value of $14-$15, which is based on sum-of-the-parts valuation.
Notablecalls: Not actionable but good to know category.
* Piper notes they were disappointed with management's FYQ107 guidance of revenue in the range of $380M-$385M and proforma EPS between $0.18-$0.19 vs. estimates of $412M and $0.23.
The lower-than-expected August quarter guidance was driven in part by the end of Treo 650 shipments into the European market starting on June 30, 2006, due to noncompliance with a regulatory issue, and firm's belief the Treo 700 for Europe is launching later than they anticipated. Management also indicated a longer-than-expected sales cycle with enterprise customers and competitive product launches from other major OEMs also impacted near-term guidance.
While Palm guided FY07 year-over-year revenue growth of 20%-25%, they remain cautious of competition impacting ASPs and have modeled 18% revenue growth for FY2007 and 13% revenue growth for FY2008. Maintains Market Perform and $19 tgt.
* Citigroup is lowering their tgt on PALM to $17 from $21. The price target of $17 is based on a P/E multiple of 18.5x CY07 EPS estimate (including stock option expenses) of $0.90 (versus prior estimate of $1.12). Firm believes a P/E-based approach better captures investors' focus on earnings. Maintains Hold.
* Bear Stearns notes that despite PALM's optimistic FY07 outlook underpinned by significant ramp in FY2H07, they are maintaining their pre-options estimates and Underperform rating given concerns about intensifying competition and potential ASP compression.
While PALM's positive FY07 outlook implies a robust FY2H07 growth driven by new product launches and Europe expansion, they are concerned that 1) smartphone market is becoming more crowded with lower-priced smartphones and 2) PALM faces challenges in Europe including entrenched competitors (NOK E61 and Samsung i320 are already ramping) and Treo brand is less known. As for valuation, theyare maintaining 2006 year-end fair value of $14-$15, which is based on sum-of-the-parts valuation.
Notablecalls: Not actionable but good to know category.
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