Hudson Square Research Launches Palm At Hold, RIMM At Buy

Hudson Square Research analyst Daniel Ernst today launched coverage of both Palm (PALM) and Research in Motion (RIMM).

• Ernst started coverage of Palm with a Hold rating, asserting that without a dramatic shift in demand, the company will run out of cash by the end of its May 2011 fiscal year. He notes that despite critical praise for WebOS, “neither the Pre nor its sibling the Pixi has found commercial success.” That said, he still things the company should attract significant interest from strategic buyers, whether from handset makers using third-party software or from PC makers seeking to make a move into handsets.
• Meanwhile, he launches coverage of RIMM with a Buy rating and $104 target price. “Driven by a high margin proprietary operating system and network, which delivers what we view as a best-in-class solution, we believe RIMM is well-positioned for continued growth in the increasingly dynamic smart phone market,” he writes. Ernst expects the company to post 20% growth in both revs and EPS in FY 2011.

In today’s trading, both stocks are losing ground on concerns about the potential impact on sales of Apple (AAPL) potentially selling a CDMA-based phone on Verizon Wireless.

• RIMM is down 92 cents, or 1.2%, to $74.79.
• PALM is down 14 cents, or 3.6%, to $3.76.