We believe a difficult U.S. economy and higher marketing expenses will hamper Align Tech, Inc.?s (ALGN) topline growth and margins. Strong international growth and foreign exchange gains will help offset this. In the near-term, we think earnings quality could become an issue as the management finds it difficult to meet growth targets. Meaningful earnings growth will be pushed out to fiscal 2009 and 2010. We are reiterating the current Hold recommendation. We have adjusted our models to reflect the current economic environment. We expect fiscal 2008 sales growth of 10%, in-line with the management?s guidance of $309 million - $314 million. Heavier marketing spending may be necessary to drive GP channel penetration required to achieve management s growth targets. As a result, margin pressure can be expected, possibly leading to earnings quality issues.[More...]

Finisar’s Q408 Earnings Call was June 12. Since then the stock has declined nearly 25%, reflecting what we believe is a general dissatisfaction with revenue growth guidance of 10-15%. This guidance appears conservative.

  Little more than 18 months after a successful IPO, optical subsystem maker Optium Corp. [OPTM] has agreed to be swallowed by larger rival Finisar Corp. [FNSR] for about $212 million. After...

Filed under: Earnings reports, Analyst upgrades and downgrades, Intel (INTC), Technical Analysis, Stocks to Buy

Optium Corporation (NASDAQ: OPTM) designs and manufactures optical subsystems for use in telecommunications and cable TV network systems. Offerings include transceivers, transmitters, analog RF over fiber products, line cards, circuit packs, and optical add/drop multiplexer products. These devices deliver voice, video, and other data services for consumers and enterprises in the long haul, metropolitan, and access segments of telecommunications and cable TV networks. Major competitors include Intel Corporation (NASDAQ: INTC) and JDS Uniphase Corporation (NASDAQ: JDSU).

The firm pleased investors last week, when it reported fiscal first quarter (Q1) earnings per share (EPS) of 8 cents and revenues of $36.1 million. Analysts had been expecting breakeven earnings and sales of $34.5 million. Management also guided Q2 revenues to $38-$39 million, versus Street consensus of $38.7 million. Needham subsequently reiterated its "buy" rating on the issue and boosted its price target to $14. OPTM shares popped on the news and then moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Altogether, brokers recommend the stock with one "strong buy", four "buys" and three "holds". Analysts expect a 30 % average annual growth rate, through the next five years. The OPTM PEG ratio (1.15), Price to Sales ratio (1.85), Price to Book ratio (1.70) and Sales Growth rate (20.36%) compare favorably with industry, sector, and S&P 500 averages. Institutional investors hold about 30 % of the outstanding shares. Over the past 52 weeks, OPTM has traded between $6.64 and $27.19 A stop-loss of $8.00 looks good here if one were to invest in the company.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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