Analyst Calls Palm (PALM) a Big, Fat Goose Egg

An analyst at Canaccord Adams is out with an extremely bearish research note on Palm (Nasdaq: PALM) today. Following what the analyst calls a "deep dive into Palm's financials and capital structure", the firm maintains its Sell rating and price target of $0.

The Canaccord report gives 6 points that its believes could justify Palm being a big goose egg:

• the firm does not see the recently unveiled Pre as a "game-changer".
  
• the initial exclusivity period with Sprint will likely dampen Palm's prospects in the US due to Sprint's (NYSE: S) questionable long-term financial viability and stressed capital structure ($18 billion in net debt on declining income).
  
• Palm could burn through $100 million in free cash over the next two quarters before the Pre is launched.
  
• by the time the device is launched, the competition will have intensified, especially with new devices expected from RIM (Nasdaq: RIMM) and Apple (Nasdaq: AAPL).
  
• Palm currently has a major gross margin disadvantage relative to peers (25.4% vs. an average of 37.6% for the group).
  
• Palm would need to sell about 4.5 million smartphones in F10 to justify any meaningful return to current share prices by our estimates. The company's historical maximum is 3.2 million smartphones in one year.

Shares of Palm are trading relatively flat today; the stock most recently traded at $7.60, up 0.40% from Friday's closing price.

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