Halftime Report: Take A Stab At Palm?
With a miserable earnings report, even worse outlook and at least two analysts now calling for the stock to trade to $0, are you just dying to take a stab at Palm?
Many traders think there could be fast money in this stock as Wall Street whispers about the company's demise.
And we're not just being dramatic, Canaccord Adams analyst Peter Misek, says in a note, 'we no longer see any value in Palm’s common equity.'
Also Morgan Joseph analyst Ilya Grozovsky tells the desk ‘the death spiral is accelerating’ and in mid-2011 he expects Palm to run out of cash.
Make no mistake, trading Palm is not for the faint of heart.
How should you trade Palm, now?
I’ve been short Palm for quite some time, explains widely followed hedge fund manager Whitney Tilson of T2. As far as I can see there is just no room for Palm products; they’re being crushed by Apple's iPhone and RIM's BlackBerry .
Nothing could help this company at this point -- that is unless they come up with some miraculous new product and I put the odds of that happening at 1% so I’m holding onto my short, Tilson explains.
However, I would not short the stock to $0, Tilson adds, because they’ve got some cash. My sense is the stock falls to around $1 and then somebody buys them, Tilson speculates.
I’d say the odds are 60% that somebody buys the carcass for a song and 30% that they file for bankruptcy, he adds. And there’s a 10% chance of a Hail Mary pass and they survive.
Instant Insights with the Fast Money traders
If you play this name, it's important to understand there’s huge short interest in Palm, adds Steve Grasso of Stuart Frankel. In fact shorts are 44% of the shares outstanding. As far as I’m concerned the stock is nothing more than a trading vehicle and I wouldn’t stay in it for more than a day. Don't think if the stock rallies, you're safe.
If you’re even thinking about a long position in Palm I’d only play it with options, counsels Brian Stutland. Your upside is capped but so is your downside.
As an investor I’d move on, there are better ways to play this space, says Patty Edwards of Storehouse.
MARKET RALLY STALLS ON QUADRUPLE WITCHING
Caution prevailed in the stock market on Friday as health care reform landed center stage once again; with a week-end vote likely Dems said they finally have enough votes to get reform through he House.
Also, investors were nervous about potential swings in the market triggered by Friday’s quadruple witching; On Friday stock options, index futures, index options and single stock options futures all expire at once.
What’s the trade?
On quadruple witching I often find stocks that are trading near a big strike price tend to gravitate there, explains Brian Stutland. Then they get stuck there. As a result, I think the market gravitates toward 1150.
I think short term the S&P could pull back to 1140 due to health care reform and other potential headwinds, but even if we take a breather stocks are probably going higher in the long-term, speculates Patty Edwards.
I’m a buyer of the market above 1150 but below that I’d go neutral, says Steve Grasso.
CALL THE CLOSE
Steve Grasso: I’m a buyer of the market above 1150 but below that I’d go neutral
Patty Edwards: I’m staying out of the market.
Brian Stutland: I think the market gravitates toward 1150.
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Trader disclosure: On March 19, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Grasso Owns (AAPL); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE) ; Finerman's Firm Is Short (SPY), (IYR), (MDY), (IJR); Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC), (BAC) Preferred ; Finerman's Firm And Finerman Own (JPM); Finerman's Firm Owns (QCOM); Finerman's Firm OWns (RIG); Najarian Owns (AA) Calls; Najarian Owns (BAC) Call Spread; Najarian Owns (C) Calls; Najarian Owns (INTC) Calls; Najarian Owns (TEVA); Najarian Owns (UNH) Call Spread; Terranova Owns (QCOM), (TER); Terranova Is Short (CAL), (UAUA), (AMR), (GS)
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