Palm: Analysts fall in love with Pre; Big money bets against it

Palm: Analysts fall in love with Pre; Big money bets against it

Summary: Wall Street analysts are beginning to fall in love with Palm and remain upbeat about the Pre's prospects. These folks are betting that Pre demand---and the WebOS that rides shotgun---will be strong enough to make Palm a player again.

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TOPICS: Mobility
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Wall Street analysts are beginning to fall in love with Palm and remain upbeat about the Pre's prospects. These folks are betting that Pre demand---and the WebOS that rides shotgun---will be strong enough to make Palm a player again. However, if you follow the money it's clear that Palm doubters abound. 

Simply put, Palm garners Wall Street kudos even as much stronger companies such as Research in Motion fall out of favor. According to Thomson Reuters data there are 8 analysts rating Palm shares a "buy." Three months ago there were only two analysts in the buy camp. One analyst calls Palm a "strong buy." Thirteen analysts call Palm a "hold." 

Also see: Palm CEO: WebOS bigger than just the Pre base

Clash of the Touch Titans; iPhone 3G 3.0 vs. Palm Pre

On Wednesday, Deutsche Bank upped Palm's price target to $12 and reiterated its "buy" rating. Why? The Pre phone (all resources) is likely to be released on time and may emerge before June 30. 

That take isn't surprising to anyone who listened to Palm's earnings conference call. Execs were confident that they could deliver the Pre and nail the launch. Traders, however, are anything but confident about Palm's prospects. 

In fact, as a percentage of float---shares outstanding---Palm is the sixth most heavily shorted company as of data through Tuesday. In fact, 45.6 percent of Palm's float is short. Short sellers bet that a stock is going to fall. 

Here's a look at Palm's standing via the Wall Street Journal's data:

That data, along with the chart that follows, sets up a potential combustible situation. If Palm does manage to save itself with its Pre launch all of the shorts betting against it are going to get squeezed. But if Palm fumbles it will be time to look out below. 

Topic: Mobility

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9 comments
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  • herd

    most analysts simply follow the herd. as we all know, their opinion is useless.
    they say buy when the share goes up and sell when it goes down.

    the pre is only vaporware at this point without a price or launch date and the
    company deep in the red and burning through the rest of the their capital till
    autumn. it seems a really high risk gamble going long here. and palm's history
    of failed launches (remember the foleo?) doesn't make things look brighter
    here.

    i am not astound that for a lot of shorts this seems to be a safe bet. don't get
    me wrong, i would like to have the pre seeing the light of day in time and to be
    a success. but even that won't safe palm for certain.
    bannedfromzdnetagain
    • Wrong pipe

      So, if most analysts are wrong, then why should we be convinced your analisys of analysts is correct?
      Narg
      • Gander on this...

        How did all those market analysts do over the past year? My guess is the
        pre will do OK in the market but will not begin to take on the iPhone due
        to base usability and overall feature set.
        Bruizer
  • RE: Palm: Analysts fall in love with Pre; Big money bets against it

    At this point in my 20 years as a tech writer and tester, I will wait until I get my hands on one until I make an opinion. I'm definitely having Palm fans wait before buying an iPhone, GPhone or Blackberry until this baby comes out. Cheers, Clyde Lerner www.ITMComputing.com
    veg4life
    • I like Palm but..

      They are taking too long to come out with the Pre/WebOS and tying the Pre to a single carrier was a very bad idea, in my opinion. I'm not likely to change carriers, no matter how good your device is.

      I'm thinking Palm's days may be numbered.
      sullivanjc
      • A single carrier?

        I'm not a shill for Apple -- the iPhone has its negative points, and I'm surviving quite nicely without one. But one of the reasons I won't go [i]near[/i] the Palm Pre -- and if market research, J.D.Power, and lost customer base are any indication -- is the agonies other folks I know and love have gone through with "that" carrier. This thing could solve world hunger and make me rich -- well, almost -- and I [i]still[/i] wouldn't go near it if it meant a contract with Sprint. And if individuals are having those problems, then how will corporate America, notoriously demanding of suppliers, react to this exclusive? I've always liked Palm, but they are cutting one of their legs out before even shipping this product. No matter how good the Pre may be, it [i]may[/i] have been too late -- but is DOA with Sprint as the lone supplier.
        chidino
  • RE: Palm: Analysts fall in love with Pre; Big money bets against it

    As a current iPhone owner (and former Sprint customer) I can attest that I was just about ready to do the "carrier-shuffle" again soon... JUST ABOUT... until iPhone OSX 3.0 was announced recently. Apple basically scrambled to fix all of the niggling issues that could have been the cornerstone of the Pre's argument against it and likely been enough to sway people from other carriers (the acrid MMS implementation comes to mind). Now that the iPhone has announced FULL true MMS, real copy/paste and the possibility of tethering (along with better multi-task capability), the only really attractive advantage to the Pre is a nifty keyboard. As much as I loved the keyboard input on my Treo, that alone won't be enough to sway me in that direction. That's also why as someone else mentioned, carrier exclusivity has the potential to infringe on the Pre's overall success in the marketplace. And yes, I realize the Pre isn't just competing with the iPhone, but the majority of potential buyers will see it that way and many of them are already with ATT. I imagine the prospects for the Pre would be much brighter if it were being sold side-by-side with the iPhone on the same retail shelf, where its strengths (and there appear to be plenty of them) could really be tested.
    Playdrv4me
  • iPhone still lacking and too expensive...

    Yet, the most nagging issues with the iPhone still remain. You still can't tether it, and the expence to own and use an iPhone still is too high. Phones like the Pre can break that barrier, and the Apple "living in a box" barrier. It'll be up to the public to see through the iPhone smoke and mirrors though.
    Narg
  • Path to Success? Get On It!!

    The "shorts" are looking past the technology and weighing 2 other factors; the network for the initial release (Sprint), and the ability of Palm to generate enough cash flow to hold until the Pre is available for other networks.

    As for "other networks", will either Verizon or AT&T add the Pre to their arsenals once the "exclusive" embargo is lifted from Sprint? I can't see AT&T doing it given their investment in the iPhone. Verizon, however, is more adept at picking up cash where it can from the broadest array of devices.

    I presume Sprint will launch the Pre, the embargo had better be 90 days, Verizon will pick it up, all will be stable at Palm

    To Palm R&D - "Get On It"... you've had the Treo out for years (touch screen with keyboard and GSM). You had better leapfrog everyone or you will become irrelevant.
    CaptCoz