Monday, April 23, 2007

Calls of Note Part 2

- RBC Capital comments on Palm (NASDAQ:PALM) saying that following recent market/product stumbles (37% Y/Y Smartphone growth vs. RIM at 81%) and eclipsing competition, Palm is expected to announce new devices utilizing new and thinner form factors, lower pricing, new software and other innovations. In order to reclaim market position and reinvigorate growth, Palm new products must 'hit the mark' with technology, styling, features, price and reliability.

Valuation, inexpensive at 0.7x EV/S and below peers at 2.1x (with $4.86/share cash), is expected to rise, possibly to $21-23 on anticipation of pending announcements (expected May), speculation of rumored devices/ features including novel Smartphones and other handhelds, perhaps with touch screens, Wi-Fi and other technologies. Palm also recently hinted at new, on-demand services.

ST appreciation may offer a trading opportunity on pending product speculation; however, the firm remains cautious long-term over competition and execution concerns and sees downside risk to $14-$15 if Palm's new offerings and strategy stumble. Maintains Sector Perform rating.

Notablecalls: Interesting comments by RBC's Mike Abramsky! He's actually saying new product announcements could drive the stock up by 5 bucks over the next month. I suspect Mr. Abramsky may have sparked a rally in PALM here.

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