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

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.