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Reexamining the Bullish Thesis on Palm

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Though not tops in smartphones, there are some key factors to consider.

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Editor's Note: This content was posted in real-time on the Buzz & Banter (clck for a free trial). It's being republished here for the benefit of the Minyanville community.


Though I'm not crazy about Palm (PALM) and would still favor Apple (AAPL) and Nokia (NOK) (and I'm warming to Research in Motion (RIMM) again) for smartphone exposure, I feel there are several reasons to re-look at the bullish thesis on Palm:

  • Small market cap relative to forward sales (roughly one-times sales).

  • Monster-short interest of 30% of float, which may have grown in recent days/weeks due to concerns about the weak quarter. So a short squeeze alone could be worth a quick $5 to $6.

  • Aside from the panic lows in late 2008, the stock has a long base of support on the weekly chart going back to 2005.

  • Still largely negative analyst coverage and skepticism about the long-term viability of Palm's story.

  • Last but not least is the fact that Goldman is doing the secondary (this alone could get the stock to $20) and my take is they will do a good job of highlighting the potential positives of this story going forward.


The balance sheet isn't a thing of beauty but it's relatively strong with about $211 million in cash against nearly $400 million in long-term debt. Thus, after the secondary, Palm will again have a healthy net cash position.

A move to new highs puts the stock firmly in the no-resistance zone and upside could be stunning.

And I'm not even mentioning the potential interest from much larger players on the acquisition front.

In light of these factors, I added Palm into the after-hours/pre-market weakness.

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Positions in PALM, AAPL

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