Lehman’s Jeff Kvaal Friday raised his rating on Palm (PALM) to Equal Weight from Underweight, citing “rapid market growth, a steadying competitive landscape and modest valuation.”
Kvaal thinks the smartphone market is growing at least 25%-30% a year, and perhaps as much as 50%. He also asserts that the competitive market is “steadying” following major launches from Nokia (NYSE:NOK) (the E61), Motorola (MOT) (the Q), Samsung (the Blackjack) and RIM (RIMM) (the Pearl) in 2006.
Kvaal notes that Treo sell through grew 30% in 2006; he also notes that new, thinner Treos are likely in 2007. He raised his May 2007 fiscal year EPS estimate to 67 cents from 61 cents (the consensus is 68 cents).
On the subject of speculation about a possible acquisition, he made this cryptic comment: “Merger activity appears to have cooled, though potential remains.”
Palm Friday was up 20 cents at $17.58.
PALM 1-yr chart