Analyst Comments: Finisar, Telefonica, CDC Corporation, PRIMEDIA, Myriad Genetics, DRDGOLD, American Oriental, Avanex, Isis Pharmaceuticals

Finisar Target $1.50

In an update issued today on Finisar Corporation (FNSR), senior technology analyst Steve Biggs, CFA has restated his Hold rating on the company. We excerpted the following details:

'As a leading provider of fiber optical products as well as network test and monitoring systems, Finisar Corporation has gained a strong position in short-distance, low-cost portion of the Ethernet market. With growing demand for bandwidth, particularly for video and IPTV, demand for high-speed bandwidth solutions such as 10 Gigabit Ethernet has increased rapidly.

'Given its leadership position in LAN/SAN and Metro Ethernet products, and its strong position in the growing 10/40 Gb/s optical transceiver market, we expect the company to experience strong top-line growth in fiscal 2009. Shares of Finisar Corporation are currently trading at a P/E multiple of 9.7x our 2009 EPS estimate of $0.15.

'On a P/S multiple, FNSR is trading at 0.9x our 2009 revenue estimate of $1.54 per share. The firm has $0.14 per diluted share in net cash (cash less debt) as of October 2007. With a strong product portfolio and vertically integrated business model, FNSR is well-positioned in the fiber optic market.

'With restructuring efforts in the past, the company has been able to narrow operating losses and reduce its cost of sales. Given its leadership position in LAN/SAN and Metro Ethernet products and its strong hold in the growing 10/40 Gb/s optical transceiver market, we believe Finisar will trade in-line with most of its relevant competitors.

'However, given the recent shortfall in revenue in two of the three quarters of calendar 2007, we maintain our Hold rating and $1.50 price target. Our target price of $1.50 is based on a multiple of 10.0x our 2009 EPS estimate and 1.0x our 2009 revenue estimate.'

Put Telefonica on Hold

Spanish telecommunication services company Telefonica (TEF) remains a market leader, but Zacks senior telecom analyst David Weissman, CFA remains cautious on the shares in the near-term.  Here's why:

'We maintain our Hold rating for Telefonica, the largest telecommunications company in Spain and Latin America. Quarterly results on a sequential basis continue to exceed our expectations. Both the top-line and bottom-line improved following recent acquisitions by the company.

'However, the competitive environment remains challenging, and we are cautious about the company's aggressive acquisition strategy, along with the integration process following such initiatives. Telefonica continues to generate strong free cash flow, although their dividend payout plans are limited and may be of concern to value investors.

'Also, the stock is trading near the high, reflecting growth projections that may be a stretch. Furthermore, there is the need to consider the currency exchange rate, which is associated with the Euro vs. U.S. as the dollar may be reaching its lower inflection point.

'Telefonica is trading at 16.7x our 2008 earnings estimate, which is at a discount to the industry average but at a slight premium to the S&P 500 metric. Telefonica's dominant position in the Spanish telecom market (both fixed-line and wireless), and attractive growth prospects in Latin America, are baseline reasons for recent investor interest in this security.'

CDC Corp. Remains a Buy

A recent pullback in share price on Chinese Internet content provider CDC Corporation (CHINA) appears to provide a good entry point, according to Zacks senior Chinese market analyst Paul Cheung, CFA:

'CDC's revenue for the third quarter of 2007 increased 27% year-over-year. However, its adjusted EPS missed market expectations by four cents due to lower revenues from its online gaming business and its wireless business. We still think CDC is well-positioned to leverage the growth opportunities in small-to-medium business enterprise software market and China's online game market.

'In addition, its stock is trading at a lower valuation than its peers. Overall, we don't think its current stock price fully reflects the company's intrinsic value. Therefore, we are maintaining our Buy rating on CDC shares.

'Based on our estimate for fiscal year 2007 earnings per share, the stock is trading at 15.8x, which is much lower than the industry mean. Based on our estimate for fiscal year 2008 earnings per ADS, the stock is trading at 14.7x, which is also much lower than the industry mean.