Zacks Analyst Blog Highlights: ASE Test, Ltd., Agilent, Evergreen Solar and SunCom Wireless

Business Wire, April 11, 2006

CHICAGO -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day, the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: ASE Test, Ltd. (Nasdaq:ASTSF), Agilent (NYSE:A), Evergreen Solar (Nasdaq:ESLR) and SunCom Wireless (NYSE:TPC). See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2673

Here are highlights from Thursday's Analyst Blog:

ASTSF Upgraded to Buy

ASE Test, Ltd. (Nasdaq:ASTSF) is the world's largest independent provider of semiconductor testing and packaging services. December quarter top and bottom line results were higher than the consensus estimate. While sequential revenue was flat, margin expansion has begun. Most importantly, the camera business (24% of last year's revenue) will be moved over to its new owner's (Flextronics) in-house facilities. The impact is substantial to both revenue and profitability. Reductions in headcount and equipment have occurred. We believe shares are poised for growth and are reiterating our Buy rating on shares of ASTSF.

ASTSF is the world's largest independent provider of semiconductor testing services. Semiconductor manufacturing is divided into front-end and back-end main processes. The relatively more complex front-end process involves the actual fabrication or formation of multiple copies of a semiconductor device on a cylindrical shaped piece of material (usually silicon-based), called a wafer.

The company is capitalizing on the outsourcing trend within the semiconductor test and assembly markets. These markets are expected to grow almost 20% per year through 2008. As testing tools and related software become more complex and expensive, firms are increasingly electing to outsource the task to specialists, such as ASE Test. In effect, customers are preserving capital that can be invested or redeployed into other corporate focus areas. ASTSF has a very large scale of operations, which permits the high fixed costs of the equipment to be spread or absorbed over a greater number of units from multiple customers, thus lowering the cost to test.

The testing segment has grown substantially over the past year, exceeding the industry growth rate by taking market share. We believe there could be near-term pressure on the stock as the remaining Agilent (NYSE:A) contract is rolled-off. Indicators point to the semiconductor manufacturing cycle hitting the trough in the first quarter with the start of a new up cycle in the third quarter. There are large die bank inventories at many semiconductor companies. We believe that the early beneficiaries to an up-cycle will be the back-end manufacturers and not the foundries or capital equipment manufacturers. Consequently, we are upgrading our rating to Buy and setting an $11.00 price target, with a corresponding 9.0x P/E multiple.

Evergreen Solar Stays a Sell

Although we continue to like the Evergreen Solar (Nasdaq:ESLR) story and the growth potential for the solar industry as a whole, we simply cannot justify the current share price valuation which is significantly ahead of fundamentals at over 700x our 2007 estimate. Positives include significant new multi-year sales contracts, increased manufacturing throughput and capacity expansions, and improving operating efficiencies. Nevertheless, continuing earnings losses, volatile and often negative gross margins, and ongoing silicon supply shortages collectively suggest that this stock is priced for perfection. Accordingly, we maintain our Sell recommendation on ESLR - based purely on valuation - with a six-month target price of $13.

The solar market remains an emerging industry and, to a great extent, Evergreen Solar's success is dependant upon the ongoing proliferation and commercialization of the photovoltaic marketplace. The market is rapidly evolving and is experiencing technological advances and new market entrants. The company's future success will depend on its ability to scale its manufacturing capacity significantly beyond the capacity of its Marlboro manufacturing facility, yet its business model and technology are unproven at the higher manufacturing level.

With negative earnings and operating cash flow to date, and with this trend expected to continue into 2007, ESLR appears overdue for share price retrenchment back in-line with the company's fundamentals. The stock also appears richly valued on the basis of relative sales and book value multiples. At 728x our full-year 2007 EPS estimate, we cannot currently recommend the stock and would advise current shareholders to take some profits. Over the near-term, price volatility may likely present far more attractive entry points. Accordingly, we maintain our sell recommendation on ESLR with a six-month target price of $13.

Sell Rec on SunCom

SunCom Wireless (NYSE:TPC), a regional cellular carrier in the Southeast region, finished a transition year as the company integrated the acquired properties of AT&T Wireless in North Carolina and Puerto Rico. However, the company's year-end 2005 results were below our estimates and we are concerned about its ability to satisfy significant debt of nearly $1.7 billion. The company has retained a financial advisor to help evaluate options for improving its financial condition. Asset sales and/or a merger are possible, but given the highly leveraged balance sheet and cash burn rate, bankruptcy protection is just as likely. We rate TPC a Sell based on lower service and roaming revenues and until the company can demonstrate improved cash positions to address its debt obligations.