Palm Shares Surge On Upgrade

Palm shares surge after Deutsche Bank raises its price target for the smartphone maker and calls it potential acquisition bait.
By James Rogers ,

SUNNYVALE, Calif. (

TheStreet

) --

PALM

(PALM)

shares surged in morning trading on Tuesday after Deutsche Bank raised its price target for the smartphone maker, which analysts say could be acquisition bait.

Describing the company's webOS as a "valuable asset," Deutsche Bank raised its Palm price target from $19 to $20. The smartphone maker, which competes with

Apple

(AAPL) - Get Report

,

Nokia

(NOK) - Get Report

and

Research In Motion

(RIMM)

, could offer upside to investors, according to Deutsche Bank analyst Jonathan Goldberg, in a note released on Monday.

"If they can grow their installed base of users and keep the carrier momentum going, this value should become more apparent," he wrote. The analyst, who gave Palm a buy rating, added that the company's App catalog is larger than Nokia's and

Microsoft's

(MSFT) - Get Report

.

Palm saw its stock rise 41 cents, or 3.89%, to $10.95, far outpacing the modest advance in tech stocks that pushed the Nasdaq up 0.35%.

It looks to be a busy year in the smartphone market, with the launch of

Google's

(GOOG) - Get Report

Nexus One

and

Dell's

(DELL) - Get Report

forthcoming

Android entry

.

Set against a backdrop of increasing competition, Deutsche Bank's Goldberg feels that Palm could be a takeover target.

"While there is ample competition, we think recent developments have made electronics vendors realize they need to control their own destiny in the smartphone space," he explained. "We think there is real potential for Palm to be acquired in the next two years."

Analyst sentiment, however, is split on Palm's prospects.

The company was rated

new neutral

by Merriman on Monday. The analyst firm said that the company will need to sign on more carriers and develop more applications to ultimately be successful in the smartphone business.

Deutsche Bank's Goldberg nonetheless believes that Palm's long-standing partner,

Verizon

(VZ) - Get Report

, can help bolster the company's numbers.

"Palm does not need to blow-out at Verizon to succeed, just good execution," he said. "We think they can sell over 600,000 units into Verizon this quarter, and investors need to see solid, sequential growth in sell-through."

Just a few weeks ago, Deutsche Bank warned that investors were

overreacting

to reports that Palm had cut its orders to suppliers of its smartphones. Now the maker of the Pre and Pixi phones is gearing up for the tech spending rebound.

Research released on Monday by Strategy Analytics revealed on Monday that smartphone sales

leapt 30%

during the fourth quarter.

-- Reported by James Rogers in New York

Related Stories

>>Smartphone Winners & Losers

>>Palm Needs a Much Stronger Signal

>>Sprint Pulls Palm Pre Offer

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