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Wednesday, May 6, 2009

Palm Still Sizzling Without News on Palm Pre Phone Price or Release Date

Palm has been on fire over the last 2 months, but all on speculation as there is still no news about the Palm Pre release date or price. Palm is up over 1000% since early December before the Pre was ever announced. Palm first traded higher in late December on news of an increased private equity stake in the company, and then really soared after January 8, 2009 when they introduced the Pre at the CES in Las Vegas. Palm was gaining steam trading near 52 week highs through early March, even as most other stocks traded near 52 week lows. However Palm did set its current 3 month low around the same time the major indices did, March 6, 2009. The good news is that Palm stayed above it's gap up, and has rallied ever since.

I think that the release date should be around the corner. I figured that Palm would have this phone out by mid June, and they'd want to give it at least 1 month for people to know when it is being released, and pre-order it (no pun intended). Palm's last quarterly release on March 19, 2009 was ugly to say the least, they lost 86 cents a share compared to a loss of 16 cents a share in the same period last year. The consensus was for 59 cents per share, so Palm missed big but it really didn't phase the stock. Palm is putting everything into this phone and their new webOS operating system, as they have often been called their "saving graces".

Technical Analysis: (click to enlarge)



The chart shows that Palm has tested resistance forming a clear double bottom on the higher gap up line (gap up closing near $5.20 on January 9, 2009, and clearly bouncing off resistance of $5.20 intraday on January 15), and also coming close to retesting this low once again on March 6 [near $5.80 after getting as high as $9.60]. The chart also shows palm has broke through its long term double [possibly triple or quadruple with two slightly smaller peaks surrounding the previous 52 week high] top at around $9.50 a share and quickly spiked to about $10.75, before testing the resistance at $9.50, and quickly getting back above $10.75 closing at its fresh 52 week high May 5 at $11.50. Looking at the chart, It looks that if Palm can hold above $9.60 it could potentially go higher in the weeks to come. However It is very difficult to analyze the next resistance point for Palm, this is because Palm is trading at multi year highs.

Palm Pre Thoughts:
My assumption is that the phone will be released about 2-3 weeks before their 4th quarter results, which is on June 22. I am sure Palm does not want investors to think they'll know too much about sales etc... for the Pre in case it's a flop. They will be able to state some info about how well/bad the pre is selling in their Q4 conference call. I am confident Palm won't beat the Q4 estimates without any help from the Palm Pre, but they'll still be able to talk the Pre up to investors and keep the stock price up, assuming sales for the new smartphone are going well. I think Sprint will be subsidizing a nice portion of the phone, and it could run around $200-$300 with a 2 year agreement (I am waiting to renew my Sprint service for this phone). I think overall we should have some more clarity about the Pre in the week to come. I think if Palm waits longer than 2 weeks (past May 20) to give details of phone price, and phone release date, there will be significant selling pressure on Palm's stock. The short interest on this stock is extremely high! The current short interest is 39.48%, which is down from over 50% short interest 2 months ago. If Palm hits a home run with this Pre smartphone, this stock could rocket to $15 and even $20, just by having shorts cover! The only bad thing about the Pre is that it is exclusively for Sprint for the time being and this will most likely hurt them, because I cannot see too many people changing carriers for this phone. Although I must say the new Sprint commercials are very creative, and I think they are creating the "buzz" they need for the Palm Pre. Let's face it the entire universe is excited about the Palm Pre, if they do it right palm will certainly be a top competitor in the future with the Pre and Pre like devices to come!


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