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PALM Stock Nears Double-Digits... Cautious Optimism Reigns

Fri Feb 13, 2009 - 4:20 PM EST - By Annie Latham

Palm's stock (NASDAQ: PALM) broke a 52-week intraday high earlier on Friday, reaching as high as $9.51 before pulling back to close at $8.70.

One contributing factor was what Eric Savitz at Barrons.com referred to as a "bullish report" on Palm's stock that came out on Friday morning from Credit Suisse analyst Deepak Sitaraman, who initiated coverage of the company with an Outperform rating and an $11 price target. In his research note, Sitaraman stated that Palm is "at the cusp of a meaningful product cycle" that should push units and revenue up sharply.

He's looking for Palm to sell 3.3 million units in calendar 2009, jumping to 6.5 million in 2010. Furthermore, he expects revenue in FY 2010 to more than double to $1.9 billion from an estimated $907 million in FY 2009.

Over at TheStreet.com, Michael Goodman noted, "One has to keep in mind that when shareholders have seen their stock fall to $1.14 within the past two months, a long-term move to $11 from $9 is still cause for celebration."

His take was a lot more cautious as he pointed out potential barriers for Palm that included Sprint (whose business is "shaky" with a strong outflow of customers), and AT&T (if they reconsider their data plan pricing, that could boost the iPhone's value proposition). He believes Palm's best bet "may be to outperform all of the iPhone wannabes."

Since Palm's CES announcement, they have been upgraded by Morgan Joseph (Buy from Hold), Global Crown Capital (Overweight from Underweight), Citigroup (Hold from Sell), and UBS (Neutral from Sell). Only JP Morgan downgraded the stock from Overweight to Neutral.

It's been nearly a month since I wrote "PALM Investors: Some Stoked. Some Cautiously Optimistic", but the feeling is still the same. Many are pulling for Pre to be a winner. But only time will tell.

For sure, Palm needs a strong showing out of the blocks. A misfire like Sony just had with its Vaio P (see Walt Mossberg's column) would be a disaster.

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