Palm Shares Form New Channel Low (PALM)

Palm Inc. (NASDAQ:PALM) shares took a tumble on Friday and for the week finished down 14%.  However Palm has lost even more when you look back to just October, since Oct 1st PALM has lost 40% of its value.

Charts don't lie, the decline is massive and as the selling continues PALM keeps pushing to a new low in its price channel.  What's more concerning is Palm's growing short intrest, finviz.com clocks it at 56% however shortsqueeze.com has it at 280%.

Friday's selloff came after Palm Inc. reported a wider Q2 loss than analysts forecast due to the costs of the company's new phones.

(Bloomberg.com) Palm’s sales and marketing expenses for the Pre and Pixi phones jumped 64 percent in the latest quarter, while total operating costs rose 21 percent. The higher expense hasn’t helped Palm’s devices crack the global smart-phone market in which Research in Motion Ltd. and Apple Inc. have gained share.

“The primary concern right now is the fact that, frankly, the units are not going to be as robust as I believe everybody hoped,” said Ilya Grozovsky, an analyst at Morgan Joseph & Co. in New York, who recommends selling the shares.

The stock has more than tripled this year on expectations that devices built on Palm’s new operating system will compete with offerings from Research In Motion and Apple.

Palm’s net loss, the company’s 10th straight, narrowed to $85.4 million, or 54 cents a share, in the fiscal second quarter, compared with a loss of $508.6 million, or $4.64, a year earlier, when company had a tax expense.

Revenue fell 59 percent to $78.1 million, Palm said. Sales, including deferred revenue, were $302 million, compared with the $267 million estimated by analysts. 

Palm Inc. (PALM) has been labeled a falling knive by Wall Street and the massive short interest is intimidating for existing shareholders.  If you have yet to take a position in PALM, give it some time, you may be able to get in at the $9 level.  At some point the short sellers will start to exit out of Palm, but for the time being this stock belongs to the traders.

Disclaimer: No positions in any of the securities mentioned in this publication.