John Paczkowski

Recent Posts by John Paczkowski

Palm "New-ness": A Share Price of $6.10

Palm’s long-suffering investors are today basking in the company’s “new-ness”–specifically, a stock that’s continuing the big rally it began last week after the announcement of the Palm Pre handset and Web OS.

As I write this, Palm is trading at $6.10–up an astonishing 85 percent since its big announcement. And it seems destined to go higher still, given the enthusiastic reception analysts have given it.

Deutsche Bank’s Jonathan Goldberg raised his rating on Palm (PALM) to Hold from Sell saying this morning that he is impressed with the Pre and the direction in which the company is now heading.

“Our thesis on Palm has been that its future is a binary outcome,” he wrote in a note to clients. “We are favorably impressed with the new device and more importantly with the new WebOS. We think the focus has now shifted from their mere survival to execution. The earnings model has the potential for significant earnings leverage, but our outlook is tempered by Palm’s history of missteps. We think they can ship 1m units FY09 and 4m in FY10. The stock has run significantly over the past two days reflecting this, but as we learn more about the popularity of the OS and the potential for them to actually ship a UMTS version of the Pre this year we will revisit our thesis.”

Obviously, there are a few noteworthy caveats in there. Still, Goldberg’s note is vastly different from the funereal notes analysts were writing about the company less than a month ago. Indeed, on Dec. 18, Canaccord Adams analyst Peter Misek essentially dismissed the company. “Due to increased competition in the industry, Palm has lost its place as a leading smartphone manufacturer and has gradually become less relevant as more competitors have introduced more innovative smartphone devices,” Misek said. “The company is financially distressed and lacks any viable future catalysts which could help restore profitability…. We believe that Palm has become largely irrelevant in the smartphone space due to a series of strategic errors and poor execution.”

Clearly, Palm’s situation has changed for the better. Now, let’s see for how long.

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