Palm Shares Up 157 Percent; S&P Down 5.9 Percent
What an astonishingly potent elixir of life Palm’s Pre announcement has proven to be, eh? Just a few weeks ago, the company’s shares were trading below $3, having been dragged deep into the mud by a grotesque conga line of quarterly losses (six, consecutively). Palm’s (PALM) market value was a third of what it was at the beginning of the year, sales of its Treo smartphones were down to 599,000 units–a drop of 13 percent–and the company held a paltry 2.1 percent of the smartphone market.
Now, not two weeks after the announcement of its Pre handset and Web OS operating system, Palm shares are trading up 157 percent, versus the S&P 500–which is down nearly six percent. And to hear tell from analysts who follow the company, Palm shares are poised to go higher still. Because the Pre and Web OS, though they’ve not yet arrived at market or even been given official release dates, are a SMASH HIT. “We believe Palm has authored possibly the best (operating system) in the handset market,” J.P. Morgan analyst Paul Coster wrote in a note to investers. “The Pre is a good device too, with specifications that position Palm well in the smartphone market in 2009,” he noted, adding, “…we think the webOS/Pre is sufficiently differentiated to spur demand and cause a major disruption in the global handset industry.”
Coster sees Palm shipping 2.25 million Pres in 2010, and another 5.75 million in 2011.
Goldman Sachs analyst Simona Janakowski is equally upbeat. “Palm’s story has shifted dramatically in recent days from being on the brink of bankruptcy to potentially entering a powerful product cycle,” she says. Janakowski expects the Pre to sell 850,000 units in the first six months.
Quite a bit of enthusiasm for an unreleased product. No wonder Palm shares continue to rally. Seems the Pre’s best feature is one that wasn’t announced when it was introduced at the Consumer Electronics Show: a mask for an existing business in rapid decline.