Opinions from analysts around Wall Street on Thursday
From Standard & Poor's Equity ResearchBEAR STEARNS CUTS PALM TO UNDERPERFORM FROM PEER PERFORM
Palm (PALM) says its recapitalization plan with private-equity firm Elevation Partners has closed.
Bear Stearns analyst Andrew Neff says while the completion of recap plan, along with addition of ex-Apple (AAPL) execs, creates optimism regarding potential revamp of its products and improvements in execution, he thinks Palm still faces several challenges in the near term, including tepid reception of its new products (Centro, Folio), delay in next generation Palm OS, intensifying competition, and weaker cash position. He adds that while ex-Apple execs have impressive track records, the timing of new products from them is uncertain, and Palm does not have recurring revenue model like Apple and Research in Motion (RIMM).
Neff cuts $0.15 fiscal year 2008 (May) EPS view to $0.08, $0.30 fiscal year 2009 to $0.21. He reduces calendar year 2008 fair value target to $5-$6 from $6-$7.
BAIRD CUTS SYMANTEC TO NEUTRAL FROM OUTPERFORM
Baird analyst Steven Ashley says while Symantec's (SYMC) second quarter results exceeded expectations, guidance for third quarter was disappointing, and, once again, management did not provide fiscal year 2008 (March) guidance. The maker of Norton antivirus software's shares dropped 13% to $18.16 on Oct. 25.
Ashley says Symantec'sbusiness model remains an amalgam of strong and weak business, and fluid with respect to the mix of ratable vs. up-front revenue. He notes Symantec guided for $0.25-$0.30 third quarter EPS on revenue of $1.425-$1.465 billion and cited: uncertainty regarding its ability to sustain improved sales execution in North America and concerns about Financial Services sector, where the company saw some mid-sized companies defer deals at end of period.
Ashlye lowers $1.67 billion fiscal year 2008 cash frow from operationss estimate to $1.5 billion, $1.78 fiscal year 2009 to $1.68 billion; and his price target to $22 from $25.
CITIGROUP UPGRADES PACIFIC SUNWEAR OF CALIFORNIA
Citigroup analyst Kimberly Greenberger says Pacific Sunwear's (PSUN) divestiture of underperforming demo division along with improving product execution in core PacSun stores could drive accelerating EPS growth on substantial gross margin recovery over the next two years. She notes that PacSun same-store sales have been improving and, having previewed their holiday product, she believes the execution is exceptional.
Greenberger upgrades Pacific Sunwear shares to buy from hold. She raises her third quarter EPS estimate to $0.15 from $0.12, but cuts $0.35 fourth quarter forecast to $0.31 to reflect the second quarter closure of 74 demo stores, yielding a new fiscal year 2008 (January) EPS estimate of $0.49 (down from $0.50).
She sees $0.90 fiscal year 2009 EPS. She ups $1.10 fiscal year 2010 EPS to $1.35. And she lifts her $15 price target to $19.