As analysts fall for Palm, big money bets against Pre

This was originally posted at ZDNet's Between the Lines.

Wall Street analysts, still upbeat about the Pre's prospects, are beginning to fall in love with Palm.

These folks are betting that demand for the Pre--and the WebOS that rides shotgun--will be strong enough to make Palm a strong market player again. However, if you follow the money, it's clear that Palm doubters abound.

Simply put, Palm garners Wall Street kudos even as much stronger companies, such as Research In Motion, fall out of favor. According to Thomson Reuters data, there are eight analysts rating Palm shares a "buy." Three months ago, there were only two analysts in the buy camp. One analyst calls Palm a "strong buy." Thirteen analysts call Palm a "hold."

On Wednesday, Deutsche Bank upped Palm's price target to $12 and reiterated its "buy" rating. Why? The Pre phone is likely to be released on time and may emerge before June 30.

That take isn't surprising to anyone who listened to Palm's earnings conference call. Executives were confident that they could deliver the Pre and nail the launch. Traders, however, are anything but confident about Palm's prospects.

As a percentage of float--shares outstanding--Palm is the sixth most heavily shorted company, according to data released through Tuesday. In fact, 45.6 percent of Palm's float is short. Short sellers bet that a stock is going to fall.

Here's a look at Palm's standing via The Wall Street Journal's data:

If Palm does manage to save itself with its Pre launch, all of the shorts betting against it are going to get squeezed. But if Palm fumbles, it will be time to look out below.