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business newsTen Reasons Palm Stock May Be Set to Skyrocket
By
James Kostohryz
Jun 18, 2009 2:40 pm
Current pullback could provide good entry point.
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Here's why:
1. Palm Pre is the real deal. It may not be a better piece of hardware overall than iPhone or Blackberry, but it doesn't need to be. It just needs to be competitive and gain a market-share niche.
Product reviews have been excellent. It effectively combines Apple’s (AAPL) touchscreen technology with a Research in Motion (RIMM)-type keypad. And Pre is competitive, in terms of features, with iPhone and Blackberry products (quality of camera, battery life, and so on).
2. Sprint’s (S) All-Everything Plan offers, by far, the best overall value in the market for 3G phone plans. This will sustain Pre sales going forward.
Good phone + cheap plan = big-time sales.
3. Palm Pre completely sold out on the weekend of June 6-7; the majority of outlets had completely run out of the product by 12:00 p.m. on Saturday. About 80,000 units were sold, and most analysts believe the company probably would have sold 150,000 if they hadn't run out. 4. The company has just hired a new, widely respected CEO.
5. It will likely make a Verizon (VZ) launch in 6 months, which would greatly expand its potential market.
6. Market capitalization comparison:
Note: 3G is the present and future of wireless telephony. Palm looks like it's going to capture the number-3 spot in the 3G smart-phone space behind Research in Motion and Apple.
But look at the market cap relative to Research in Motion, and then 2G laggards such as Nokia (NOK), LM Ericsson Telephone (ERIC), and Motorola (MOT). In this context, Palm’s low valuation isn't sustainable. Their valuation will rise in the open market, or the company will be bought out at a huge premium that reflects their market share. Perhaps both will occur.
7. The company is attractive as a strategic acquisition candidate. See more on this below. 8. Short interest is at over 29% of the float. There's clear potential for monster short squeeze.
9. The top-10 holders of the stock control 77% of the shares outstanding. I perused the list and these are strong hands. Thus, the effective float for this stock is tiny. This magnifies the potential for a massive short squeeze.
10. Virtually nobody has believed in these guys; almost everybody had written them off. Perhaps, until now.
Positions in PALM.
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