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Peoplesoft Rises on Analyst Upgrade

It cites evidence of recent contract wins.

Shares of



were higher after Thomas Weisel upgraded them to outperform from peer perform and raised the price target.

Thomas Weisel cited direct checks with customers and systems integrators that show confidence both in the company's products and a belief that


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hostile bid to acquire the company will fail. The brokerage raised the price target to $26.50.

Peoplesoft was recently up 25 cents, or 1.4%, to $18.50. The 52-week range is $11.75 to $22.50.

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According to Thomas Weisel, Peoplesoft recently won several large contracts in government and financial services, apparently driven by its new customer relationship management software beating





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The brokerage also cited customer approval of the product roadmap laid out after the completion of the JD Edwards acquisition. Peoplesoft is expected to deliver new products in the fourth quarter appealing to current real estate industry customers. Accordingly, Weisel bumped up its estimate of 2003 earnings to 55 cents a share and 2004 earnings to 93 cents a share, well above the consensus of 86 cents a share. It also increased revenue estimates slightly for both periods.

The new price target would give Peoplesoft a price-to-earnings ratio of 48 times Weisel's estimated 2003 earnings, above the already lofty consensus estimate of 42. Based on 2004 earnings, which takes into account the full effect of the JD Edwards deal, Weisel's estimate would give the company a PE ratio of 28. In comparison, the First Call analyst consensus is for Oracle to trade at 30 times expected 2004 earnings, and for Seibel to trade at 35 times 2004 earnings.

For the moment, downside risk is limited since the stock is still trading $1 below Oracle's cash offer of $19.50 per share.