Morgan Joseph Upgrades Palm (PALM) to Buy On The New Pre

January 9, 2009 8:25 AM EST

Morgan Joseph upgrades Palm (NASDAQ: PALM) to Buy with a $6.50 price target following the intro of the Palm Pre.

The firm said, "Yesterday, Palm introduced what we believe is an attractive and long-awaited Smartphone, and a new OS. Dubbed the "Palm Pre", the device is fully equipped with a touch screen, slide-out keyboard, 8 Gb of memory, and music download capabilities, among other features. We were equally impressed with Palm's new OS, called "Palm webOS." Palm webOS offers full integration of information from web-based applications such as Facebook, Outlook, and Google and the ability to present the information in an organized view on the phone. We believe this integration to be the major differentiation from other Smartphones, like the iPhone, allowing users to seamlessly integrate with Facebook and other services to come."

However, Morgan Joseph still has questions about the device. First, the firm believes the 8 Gb of memory is not sufficient and expects an increase in memory on the next phone iteration. Second, the firm would like to see Palm’s products added at AT&T (NYSE: T) and Verizon (NYSE: VZ). Finally, no price was given, but the firm expects Palm to be competitive with Apple's (NASDAQ: AAPL) iPhone.

Finally, the firm believes that near term fears have been mitigated. Morgan Joseph believes Elevation Partners will not allow Palm to default on debt obligations. In addition, they believe there is no near term liquidity issue.

Palm, Inc. develops, designs and markets mobile computing devices as well as related add-ons and accessories.

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• Morgan Joseph
• Facebook
• Elevation Partners

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