Analyst puts ‘Sell’ rating on beleaguered Palm; Pre return rate as high as 40%

Apple Online Store “Analyst Kevin Dede with boutique investment banker and brokerage Jesup & Lamont this morning initiated coverage of Palm shares with a ‘Sell’ rating,” Tiernan Ray reports for Barron’s.

“Dede thinks Palm’s August-ending Q1 will reflect a high cost for returned units of the Pre owing to a manufacturing defects. Dede bases his analysis on a survey of Pre buyers at an enthusiast Web site, According to that survey, he concludes, 40% of initial Pre sales are returned,” Ray reports. “In addition, ‘Impromptu questioning of managers of local retailers (Sprint, Best Buy and Radio Shack) indicated that about one in three devices is being returned.”

MacDailyNews Note: Please see:
Disillusioned Palm Pre sufferers complain as they watch their devices fall apart at the seams – July 01, 2009
Report: Palm Pre screen crack issue emerges; cracks radiate from center ‘home’ button – June 17, 2009
Palm Pre’s plastic touchscreen yields festival of scratches (with photo) – June 17, 2009

Ray continues, “Dede cautions that ‘we have neither sufficient confidence nor statistical relevance to bend this data into an official report,’ but his point is that the stock trades at 48 times next calendar years’ consensus earnings estimate of 32 cents per share, which he feel does not adequately discount the risk of a high cost for returned Pres.”

Full article here.

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