PALM Down Ahead of Thursday's Earnings

Palm (PALM) shares are under pressure ahead of the company’s announcement after the close Thursday of results for its fiscal third quarter ended February. The Street is looking for revenue of $315.3 million and a loss of 15 cents a share. As I noted on Monday, some analysts think the company will report strong demand for its $99 Centro smartphone, but that margins could be hurt by the cannibalization of the higher-priced, more profitable Treo.

RBC Capital’s Mike Abramsky Wednesday morning asserted in a research note that the company should beat the consensus for the quarter: he sees $321 million in revenue and a loss of 14 cents. (That would be a bit above guidance of $310 million to $320 million.)

Abramsky says Centro demand is “steady” at Sprint (S), “stronger” at AT&T (T); he sees 325,000 units in the quarter, up from 150,000 in FY Q2. But he also says Treo momentum “continues to deteriorate,” forecasting 507,000 units, down 20% sequentially.

Abramsky says that despite a “compelling valuation,” it is too early to jump into the shares. He maintains a Sector Perform rating and $6 price target on the stock.

Palm Wednesday is down 35 cents, or 6.9%, to $4.74.