PALM Preview: A Lot Riding on the Pre

Thursday evening after the close of trading, Palm (PALM - commentary - Trade Now) will report its results for the quarter ended May 31. The Street expects the company to lose 62 cents per share on revenue of $80.6 million for the May quarter. For the August quarter, the sell-siders are forecasting another loss of 30 cents a share on revenue of $279 million.

For the next fiscal year, ending May 2010, the analysts are expecting a loss of 74 cents per share on revenue of $1.51 billion, which is more than double the revenue Palm saw in the fiscal year that ended May 31, 2009. For fiscal year 2009, current consensus calls for a loss of $2.37 per share on revenue of $729.8 million.

Palm has been flying high of late on optimism regarding the new Palm Pre. Since the launch of the Pre on the weekend of June 6 and June7, the analysts have been forecasting sales of 150,000 units to date. Forecasting firm Changewave stated in its June report that Palm-buying intentions went from 4% in March to 8% in June, a cool double.

Most Sprint (S - commentary - Trade Now) stores are running low on the Pre despite daily shipments from Palm. Palm will also be launching a $99 handset soon, with additional devices to be rolled out in the current fiscal year. In addition, Palm is looking at expanding its carrier agreements with the likes of Verizon (VZ - commentary - Trade Now) and AT&T (T - commentary - Trade Now).

Palm has staked its future on the Pre, and the Street is clearly expecting a lot from the Pre going forward. Analysts are expecting revenue to double from current levels, primarily on the basis of the success of the Pre. If those forecasts turn out to be irrationally exuberant, look for Palm shares to get clocked hard. On the flip side, if these current forecasts turn out to be accurate, Palm shares have a lot higher to move.

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At the time of publication, Somaney was long Apple calls, although positions may change at any time without notice.

Jay Somaney is a partner and fund manager with TSG Capital Partners, a hedge fund based in Plano, Texas, and founder of GlobalTechStocks.com, a subscription site that focuses on technology and Indian stocks (including ADRs), providing information, news and chatter. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Somaney appreciates your feedback; click here to send him an email.