Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Reexamining the Bullish Thesis on Palm


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


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.

Positions in PALM, AAPL

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos