JP Morgan downgraded Palm (PALM
) to neutral from overweight, explaining that the company's stock price is approaching its appropriate value.
Analyst Paul Coster also sees the near-term risk that fourth quarter consensus expectations about the company's performance are too high. He says carriers may hold off on Treo orders and reducing channel inventory ahead of calendar year second half product introductions. He notes his 33 cents third quarter earnings per share (EPS) on $375.3 million sales estimate was slightly above the consensus, but he's well below the fourth quarter consensus with 31 cents EPS on $383.1 million sales. He's assuming that Research in Motion (RIMM
)'s tussle with NTP did not lead to major defections to Palm; Palm's expansion of its Treo product line-up takes place in late calendar year 2006. Palm's 2-for-1 split does not signal strong near-term upside.