Wall Street Weighs In On Palm's (PALM) Disastrous Report - Two Say It's Worth $0, Another Highlights Growing Chance of a Takeover

March 19, 2010 9:54 AM EDT
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Price: $5.69 --0%

Rating Summary:
    0 Buy, 0 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 8 | Down: 10 | New: 12
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Wall Street analysts are have absolute hate for Palm (Nasdaq: PALM) today after the company reported lackluster Q3 results and gave Q4 sales guidance that was half of what analysts were expecting.

Shares of Palm are down 18.6 percent to $4.60 today on the news, but two analysts have made dramatic calls that the stock is 'worthless.' Yet another highlighted that an acquisition is increasingly likely to monetize Palm's OS.

Here is a summary of some of the analyst comments this morning:

Canaccord Adams - "We believe Palm's troubles will only accelerate as carriers and suppliers increasingly question the company’s solvency and withdraw their support. With what appears to be roughly 12 months of cash on hand, an accelerating burn rate, a complete lack of earnings visibility, and substantial debt and preferred equity, we no longer see any value in the company's common equity." Reiterate Sell rating, cuts price target from $4 to $0.

Morgan Joseph - Palm's "death spiral is accelerating" and they are doubtful about Palm's survival. The firm said, "Despite Palm's efforts at conserving cash, we estimate that it may only have sufficient cash to operate through mid-CY2011 given expected cash burn and net losses;" Downgrade to Sell with a $0 price target.

Deutsche Bank: "Palm reported a weak quarter with cash revenue of $366 million, slightly better than our recently downward revised estimates and consensus. They shipped 960k units into the channel, but sell-through was 408k, their lowest level in almost three years and well below levels they saw prior to the launch of webOS. We think numbers could deteriorate further, and have lowered our estimates accordingly, but believe much of this is priced into the stock, meriting a Hold rating...We would caution against getting overly negative. We think the company has new products coming." Maintains Hold, lowers price target from $8 to $5

Susquehanna "Palm's 3Q FY10 results support our thesis that shares will remain under pressure near term, trending down to the $3-$4 level. Smartphone sell-through and 4QFY10 revenue guidance was well below even our low on the Street estimates, escalating our channel inventory concerns over the next few quarters." Maintains Neutral rating

Goldman Sachs: "The dramatic deterioration in Palm’s sell-through trajectory makes it increasingly likely that its lack of scale (1%-2% share in smartphones) will result in mounting losses...we see an acquisition as an increasingly likely path for monetizing Palm's OS." Maintains Neutral rating and lowers price target from $7 to $4.60.

Kaufman Bros: "we are less confident in the company's prospects as an on-going concern. We see 3 scenarios: (1) company gets sold but could be a take-under; (2) company needs to raise more capital; or (3) company runs out of money. We have higher conviction that the company may not see profitability until 4-6 quarters out, or perhaps longer. We remain convinced that smart phones are a highly competitive space with the likely outcome a few winners and mostly losers." Downgrades from Hold to Sell, $3 price target.

Piper Jaffray: "Based on increasing smartphone competition and continued weak sales of webOS based products, we remain cautious on Palm's ability to increase sell-through of its products in the near-term. As such, we are lowering our pro-forma EPS estimates for FY10 from ($1.38) to ($1.76) and our FY11 estimate from ($0.86) to ($1.35)." Maintains Neutral, cuts price target from $7 to $5

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Piper Jaffray, Deutsche Bank, UBS, Kaufman Bros., Canaccord Adams, Morgan Joseph, Susquehanna International Group of Companies