SUNNYVALE, Calif. (

TheStreet

) --

Palm

(PALM)

has made a miraculous comeback as a smartphone contender, but lately it's been taking it on the chin as Wall Street sees reasons for concern.

The early success of the Pre phone and its WebOS software have gotten Palm back in the game against the likes of

Apple

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,

Research In Motion

(RIMM)

,

Nokia

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and

Google's

(GOOG) - Get Alphabet Inc. Class C Report

Android phones.

But staying in the game is Palm's new challenge.

Here are three of the biggest concerns looming over Palm:

  • Financing: The company's technology might be stable, but its books need help. Chances are Palm needs another dilutive stock sale to raise cash.
  • Competition: The Pre's debut was quickly upstaged by Apple's 3G S iPhone and RIM's BlackBerry Tour.
  • Demand: After a strong start, the Palm Pre has been languishing on the shelves at Sprint (S) - Get SENTINELONE, INC. Report.

Palm told analysts on an earnings call last month that it had "sufficient capital" to fund operations and growth. But the speculation around the company's need for more cash continues to grow.

Palm has $255 million in cash and $394 million in debt. The company, while it did trim its losses, still burned through $72.4 million in cash in the most recent quarter. At that rate, Palm has less than a year's supply of money.

Kaufman Brothers analyst Shaw Wu says he is a fan of the Palm Pre/WebOS technology, but he initiated coverage on Palm last month with a hold rating, citing the company's heavy flow of red ink.

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Wu says the biggest risk to Palm's continued success -- and more specifically its stock price -- is the company's finances.

To that end, Wu says he "would not be surprised if there were a financing event coming in the near future. It makes a lot of sense," says Wu.

Palm raised $103.5 million in a public stock offering in March, the move came ahead of the Pre's debut and was billed as the big funding push to cover the Pre development. The stock more than doubled since then. But a quick follow-on offering might create the fear that Palm will continually come back to investors for more money.

That would be less of a concern if Palm was selling more Pre phones.

In a note Thursday, Morgan Joseph analysts estimated Palm Pre sales have dropped by half to 100,000 units from 200,000 in June. This report would

dispute earlier tallies

by RBC that suggested Pre phones were still flying off the shelves.

One factor that may be working against the Pre is Sprint, its exclusive sales partner.

Sprint is the sinking No. 3 wireless telcom company with an alarming defection rate. To add to the mix, Sprint has less than four months left to sell the Pre exclusively until

Verizon

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and possibly

AT&T

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get it. Fans of the larger telcos may be holding off on Pre purchases until other carriers get it.

Then again, Sprint may be part of another problem. Apparently other smartphones at Sprint have caught customers' eyes. The BlackBerry Tour at Sprint "has arguably stolen some thunder from the Palm Pre," Kaufman's analyst Wu wrote in a note Thursday.

Palm faces even more pressure as new phones from Nokia, RIM and

Motorola

(MOT)

hit the market during the holidays.

The company says it's not worried, telling analysts on the earnings call that it sees "the potential of turning cash flow positive in the second half of fiscal 2010." That isn't profit, but if true, it's going in the right direction.

Until then, Palm needs more telco partners, more WebOS devices and more money to keep the miracle alive.

--

Written by Scott Moritz in New York

.