J.P. Morgan Ups Rating on PALM

Palm (PALM) shares are higher Monday after J.P. Morgan’s Paul Coster raised his rating on the stock to Overweight from Underweight.

Coster says Centro sales may be exceeding expectations, “as the most popular device offered by the 16 Sprint (S) stores we surveyed across the nation.” He also says that indications from Asia are that production schedules “may top our unit shipment forecasts in the next 6 months.” He says there is “upside” to EPS estimates.

Meanwhile, Coster expects the company to introduce several new products in 2008, including a version of the Centro for Verizon (VZ) and AT&T (T), plus a second-generation Windows-based device for the GSM market. Late in 2008, he expects the company’s new operating system to be launched, “leading to a flurry of product activity in early 2009.”

Coster notes that the stock is down 41% since late October, versus an 8% drop by the S&P 500. He notes that the stock as of Friday’s close traded at 0.5x estimated ‘08 sales, a discount of 79% to his coverage universe and a nearly 50% discount to the company’s mean 2-year price/sales multiple.

Palm Monday is up 35 cents, or 5.8%, at $6.37.