Shares of smartphone maker Palm, Inc. (PALM) continued its downward trend that began after markets closed on Thursday, following the company's disappointing sales of its latest smartphones.
Palm's share, which closed at $5.65 on Thursday, fell 14.51% to $4.83 in after-hours trading. Upon resumption of trade on Friday, the stock continued its fall and has reached a year-to-date low of $4.02 at present.
Although Palm's loss narrowed during the third quarter, the company revealed that it could sell only 408 thousand smartphones of the total 960 thousand units shipped. Sell-through rate for the quarter declined 29% sequentially and 15% year-over-year. Moreover, Palm said it expects fiscal 2010 revenues well below its prior guidance range of $1.6 billion to $1.8 billion owing to lukewarm response to its products.
Meanwhile, Street analysts seem to have thrown in the towel for Palm with many lowering their price targets on the company to nil per share. While analysts at Canaccord and Morgan Joseph lowered the target price to $0, other analysts downgraded their target prices.
Kaufman Brothers downgraded Palm to $3 per share, while analysts at Barclays reduced the price target on Palm shares from $7 to $4.50 stating that phone inventory could become an issue this year. The firm maintained its Equal Weight rating on the stock, but lowered its 2010 earnings estimates to a loss of $1.49 per share. Analysts' estimate a loss of $1.30 per share.
Morgan Keegan is maintaining a Market Perform Rating for Palm and has classified the stock as speculative. Low sell-through rates are worrying analysts as they say the company may see a cash crunch if sales of smartphones does not improve. "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," analysts said. Morgan Keeman analysts see revenues of $1.14 billion for fiscal 2010.
Analysts at UBS reiterated a Sell rating on Palm and lowered its price target to $4.00 from $4.50. UBS also lowered its fiscal 2010 revenue estimates to $1.17 billion from $1.24 billion and EPS estimate to $1.73 per share from $1.51 billion.
On average, 28 analysts polled by Thomson Reuters currently estimate a loss of $1.30 per share on revenues of $1.30 billion for the quarter. Analysts' estimates typically exclude special items.
PALM is currently losing $1.63 or 29.03%, and is trading at $4.01 on a volume of 113.36 million shares on Nasdaq.
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