Wednesday, September 06, 2006
Position Updates: PALM
It appears the stock God's do love me.
Thanks Merril!
This is an excerpt from a research note out of Merril Lynch today:
Telecom Equipment-Wireless:
Smartphones: PALM could outperform RIMM near term;
Subject: Earnings Preview
o Palm more interesting than RIM in the near term
The next few weeks could see several new smartphone launches from RIM and Palm. Ahead of those launches and earnings reports, we position Palm as a relatively more interesting play near term compared to RIM, particularly given that both players are leveraged to the same growth driver (smartphones), yet Palm stock is up only 2% vs +31% for RIM and +9% for Nasdaq.
PALM: multiple new product cycles, attractive valuation, potential share buyback
We expect Palm to report an in-line August quarter on US strength offset by European weakness. However, November quarter outlook could positively surprise on the recent launch of Treo 700wx at Sprint and the upcoming launch of the Treo 750v at Vodafone Europe. Potential news flow around the upcoming low-priced Treo could also benefit sentiment. Finally, Palm's outsized cash balance (~35% of current market cap) could prompt a meaningful share buyback, in our opinion. We reiterate our Buy rating and $19 price objective on Palm stock. While competition is increasing, we believe Palm stock, trading at <10x its forward PE ex-cash, well discounts the risks.
RIMM: stock discounts most near term catalysts, although still the best long term play in the smartphone space
We expect RIM to outperform August quarter consensus, with 8700 handset strength at Cingular/T-Mobile and 7100 strength at Verizon, offset by continued weakness at Sprint. We believe RIM could meet or exceed our 689K new subscribers estimate which is at the midpt of RIM's outlook of 670-700K new subs. We also expect strong guidance for the November quarter where we are 2c above consensus on 742K new subs estimate. However, RIM stock appears to mostly discount potential near term catalysts; the 8703 smartphone launch at Verizon and the consumer (8100) handset launch at T-Mobile/Cingular. Longer-term, however, RIM's integrated business model of handset + software + service remains the most defensible way to play the high-growth smartphone.
Thanks Merril!
This is an excerpt from a research note out of Merril Lynch today:
Telecom Equipment-Wireless:
Smartphones: PALM could outperform RIMM near term;
Subject: Earnings Preview
o Palm more interesting than RIM in the near term
The next few weeks could see several new smartphone launches from RIM and Palm. Ahead of those launches and earnings reports, we position Palm as a relatively more interesting play near term compared to RIM, particularly given that both players are leveraged to the same growth driver (smartphones), yet Palm stock is up only 2% vs +31% for RIM and +9% for Nasdaq.
PALM: multiple new product cycles, attractive valuation, potential share buyback
We expect Palm to report an in-line August quarter on US strength offset by European weakness. However, November quarter outlook could positively surprise on the recent launch of Treo 700wx at Sprint and the upcoming launch of the Treo 750v at Vodafone Europe. Potential news flow around the upcoming low-priced Treo could also benefit sentiment. Finally, Palm's outsized cash balance (~35% of current market cap) could prompt a meaningful share buyback, in our opinion. We reiterate our Buy rating and $19 price objective on Palm stock. While competition is increasing, we believe Palm stock, trading at <10x its forward PE ex-cash, well discounts the risks.
RIMM: stock discounts most near term catalysts, although still the best long term play in the smartphone space
We expect RIM to outperform August quarter consensus, with 8700 handset strength at Cingular/T-Mobile and 7100 strength at Verizon, offset by continued weakness at Sprint. We believe RIM could meet or exceed our 689K new subscribers estimate which is at the midpt of RIM's outlook of 670-700K new subs. We also expect strong guidance for the November quarter where we are 2c above consensus on 742K new subs estimate. However, RIM stock appears to mostly discount potential near term catalysts; the 8703 smartphone launch at Verizon and the consumer (8100) handset launch at T-Mobile/Cingular. Longer-term, however, RIM's integrated business model of handset + software + service remains the most defensible way to play the high-growth smartphone.
Comments:
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Nice call on Palm. I weakly bailed out about a dollar ago. Damn. Today's accelerated move up is truly the look of a squeeze. You still holding to $16 or through earnings? I think the gap between RIMM and PALM narrows (http://finance.yahoo.com/q/bc?s=PALM&t=1y&l=on&z=m&q=l&c=rimm) and the blue line crosses the red. Treos are sexier than Blackberries.
We will see.
I must say, the stock God's tempted my patience with PALM-- shaking people out last week.
However, PALM looks like a new stock. I'll play it day by day.
My position approaches 200,000 shares.
RACK knifing rather nicely too:)
I must say, the stock God's tempted my patience with PALM-- shaking people out last week.
However, PALM looks like a new stock. I'll play it day by day.
My position approaches 200,000 shares.
RACK knifing rather nicely too:)
That's a tough one.
I think it will settle in around $24.
However, I can't suggest you initiate a short position-- as the stock is already down 6+%.
SIRF, WFR, ANAD and CYMI also look like good short candidates.
Keep in mind, I am not a net bear. I am merely using some shorts to hedge my longs.
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I think it will settle in around $24.
However, I can't suggest you initiate a short position-- as the stock is already down 6+%.
SIRF, WFR, ANAD and CYMI also look like good short candidates.
Keep in mind, I am not a net bear. I am merely using some shorts to hedge my longs.
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