Palm (NASDAQ: PALM) Retains Market Perform Rating Despite Cash Concerns
March 19, 2010 7:30 AM
Morgan Keegan maintains a Market Perform Rating for Palm (NASDAQ: PALM) and classifies the stock’s suitability as speculative.
Analysts are concerned that Palm’s cash balance may become an issue in the future if sell through does not improve. They explain, “Our GAAP revenues for fiscal 2010E/2011E go to $1.14 billion and $1.42 billion, respectively; our EBITDA estimates go to losses of ($219) million/($175) million. While we are encouraged by efforts to improve sales in the channel and remain impressed by the webOS platform, we believe the margin for error at Palm has grown increasingly thin.”
Analysts reiterated their confidence in Palm’s products, saying “We believe Palm’s webOS has clear value for mobile device vendors that do not have their own OS”. However, they also cautioned, “We expect Palm’s cash balance to drop significantly over the next several quarters, and suspect this may become a bigger issue if sell through does not improve meaningfully”.
