Zacks Analyst Blog Highlights: Newcastle Investment, Alexza Pharmaceuticals, Novatel Wireless, LDS Solar and Cymer

Business Wire, May 15, 2008

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: Newcastle Investment Corp. (NYSE: NCT), Alexza Pharmaceuticals, Inc. (Nasdaq: ALXA), Novatel Wireless (Nasdaq: NVTL), LDS Solar (NYSE: LDK) and Cymer, Inc. (Nasdaq: CYMI).

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Here are highlights from Wednesday's Analyst Blog:

Hold Newcastle for Yield Only

Shares of Newcastle Investment Corp. (NYSE: NCT) have tumbled over the past year as the mortgage markets are still in disarray. As expected, the company continued to take charges in the 1st quarter due primarily to impairments on subprime loans. NCT continues to sell assets, at losses, to pay down debt and shore up the balance sheet.

The quarterly payout was cut 65% to $0.25 per share, and the yield is now 10%. We feel that the company has enough liquidity to remain solvent, although we are changing our near-term recommendation to Hold. Residential mortgage markets have not yet bottomed out and the liquidity crisis is not over.

Pipeline a Bit Early on Alexza

Alexza Pharmaceuticals, Inc. (Nasdaq: ALXA) focuses on the development and commercialization of proprietary products for the treatment of acute and intermittent conditions. We are enthusiastic on the company's proprietary novel Staccato system that reformulates oral or injectable small molecule compounds into an inhalable aerosol.

The company has six product candidates in clinical stage trials, including leading candidates AZ-001 for migraine headache pain relief and AZ-004 for acute agitation in patients with schizophrenia. Recent data on both drugs lead us to believe the Staccato system is both safe and highly effective.

Our price target is $8 and our rating is Hold. At this time, we think investors can be patients with Alexza. Preliminary data on AZ-001 and AZ-004 looks encouraging, but the company still has to complete phase III trials before we proclaim either a success. Upside over the next few quarters could come from the announcement on a partnership or the phase II data on AZ-002.

Novatel a Hold on Competition

We maintain our Hold recommendation and the same valuation target for Novatel Wireless (Nasdaq: NVTL), a leading provider of wireless data access cards and embedded solutions, following first quarter 2008 financial results. Lack of proper business execution, delays in product shipment due to technical issues, and a shift in market demand towards the company's low-end products, were primary reasons sited for lackluster performance.

We believe these issues will continue to impact the company through the remainder of this fiscal year, as Novatel did not provide any specific time frame and visibility when opportunities from its new product-cycle can be derived. In addition, the market for wireless data access equipment has become more competitive as several large vendors are on the verge of introducing innovative products with attractive pricing.

Margin Concerns for LDS Solar

LDS Solar's (NYSE: LDK) revenue and earnings for the first quarter continued to show strong growth, which again exceeded market expectations. We think LDK will continue to grow quickly in the next few quarters due to its aggressive capacity expansion and strong growth of solar power industry worldwide.

However, we are concerned its gross margin will continue to decline due to rising pre-sold orders and increasing competition in the wafer segment. In addition, it will take some time for investor confidence to return. Therefore, we are maintaining our Hold rating on LDK.

Cymer Downgraded to a Hold

Cymer, Inc. (Nasdaq: CYMI) dominates the market for DUV light sources contained within excimer laser-based photolithography systems used in the production of semiconductors. We feel growth in ArF Lithography will drive growth in the second half of 2008.

However, competition in ArF [Argon Fluoride] has intensified as Gigaphoton has just shipped its 100th ArF system and probably now has a 40% market share. Consequently, we are downgrading our rating on CYMI shares to a Hold, though keeping our target price at $30.00, which corresponds to a 13.9x P/E.

The stock is currently trading at an 12.5x multiple of price to our 2009 earnings estimate (P/E). We do not anticipate any large changes in the firm's dominant market position, however we expect Gigaphoton to take market share in ArF until Cymer creates another technologically superior product. The firm is in a cyclical industry that is currently in the down portion of a cycle. However, advanced ArF products have ASPs [average selling prices] holding strong.

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