Zacks Analyst Blog Highlights: Diamond Foods Inc., Skechers USA, Inc., Town Sports International Holdings, Inc., Celgene Corp. and Microchip Technology Inc

Business Wire, Oct 29, 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: Diamond Foods Inc. (Nasdaq: DMND), Skechers USA, Inc. (NYSE: SKX), Town Sports International Holdings, Inc. (Nasdaq: CLUB), Celgene Corp. (Nasdaq: CELG) and Microchip Technology Inc. (Nasdaq: MCHP).

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Here are highlights from Tuesday's Analyst Blog:

Diamond Foods at High Valuation

Diamond Foods Inc. (Nasdaq: DMND) is aggressively pursuing strategies to grow sales through increased distribution, strong advertising campaigns, and product innovation. The company has reported above expectations earnings for the last three quarters. With the stock now fairly valued, a Hold rating is recommended.

Diamond Foods does not have a long earnings history. However, the company has a sales growth history with sales having grown at a 10.2% compound annual growth rate (CAGR) over the last five years. Our target price is $29.00, which is based on a 32 P/E multiple on the 12-month trailing earnings.

Skechers Keeps Its Foot-hold

Skechers USA (NYSE: SKX), based in Manhattan Beach, California, makes a diverse range of footwear for men, women and children. The company reported disappointing results for the third quarter. Sales missed our estimate by $12 million. EPS beat our estimate by $0.06, but the upside was due to a tax benefit of $0.22. What's more, the company's fourth-quarter guidance came in below our previous estimates of $323 million in sales and EPS of $0.28.

Economic conditions continue to worsen, and that is pressuring consumer spending and negatively affecting Skechers' results. As a result, we are reducing our estimates for 2008 and 2009. Longer term, the company's diverse portfolio of brands, international growth opportunities, and retail store expansion should bode well for its stock price. Still, its near-term upside will be limited until macro conditions show signs of improving. We maintain our Hold rating.

Town Sports a Buy, Pre-Earnings

Town Sports International Holdings, Inc. (Nasdaq: CLUB) owns and operates fitness clubs in the Northeast and Mid-Atlantic regions of the United States. The company is the fourth-largest fitness club operator in the country, measured by the number of clubs (161). We reiterate our Buy rating on shares of CLUB.

We consider the shares of Town Sports International to be undervalued at current levels. Shares of CLUB are trading at approximately 3.3x our 2008 EBITDA estimate, a multiple which we consider to be excessively low. Our $8.00 price target on shares of CLUB reflects a multiple of approximately 4.5x our estimated 2008 EBITDA. We consider this multiple to be conservative even in a recessionary environment.

Celgene Positives Priced In

Celgene Corp. (Nasdaq: CELG), based in Summit, New Jersey, is a fully integrated biotechnology company focused on discovery, development and commercialization of drugs in the area of cancer and immune/inflammatory diseases. The acquisition of Pharmion brings three medically meaningful products -- Thalomid, Revlimid and Vidaza -- into market, which will drive growth in 2008 and beyond.

Celgene has all the makings of a Buy-rated stock such as solid new product story, decent pipeline and incredible 84% four-year earnings growth. However, we are concerned about the tough competition from Velcade and other products for myelodysplastic syndrome and multiple myeloma. Label expansion on Revlimid and Vidaza into other hematological cancers should offer upside for Celgene. We believe all this is currently reflected in the stock.

Microchip Tech Guides Lower

Microchip Technology Inc. (Nasdaq: MCHP) reported in-line September results and guided revenue significantly lower for the December quarter. Revenue and GAAP EPS were $269.7 million and $0.41, respectively.

MCHP remains one of the more resilient stocks in semis following its announcement that it will maintain strong dividends in spite of a weak economy and pursue an aggressive initiative to preserve cash. Microchip guided December quarter revenues to decline 8-16% sequentially. Due to broad based weakness in demand, orders decelerated in October and resulted in a significant decline in Q3 backlog.

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