National Semi a Good Buy to $28
National Semiconductor (NSM) is an OEM of analog and mixed signal integrated circuits. November quarter revenue was in-line with consensus estimates, although the EPS exceeded. Revised guidance for the second quarter is for a -8.8% to -9.8% revenue decline in the February quarter. New higher-margin products continue to grow in the mix, as the company generates very attractive gross margins, despite the relatively low utilization rates at its fabs.
Additionally, operating expenses were down very significantly in the last quarter, the third straight quarter of decline. The share price plummeted on news of the lower outlook. We are reiterating our Buy rating on NSM shares.
We feel positive about this stock, but we do not like the inconsistent style of providing key information. We are reiterating our Buy rating and $28 target price, which corresponds to a 18.5x P/E (2008 earnings).
Expect Bounce-back from Iomega
Iomega (IOM), well known for its Zip storage product, is in the transition from a product-based company to a service orientated organization. The company boasts six consecutive quarters of profitability.
It has revised its guidance for 2008. Revenue is well ahead of our estimate, but earnings are slightly below. We have increased our estimates for 2009 based on higher revenue but lower gross margins. We rate the stock a Buy with a $7 price target.
Iomega Corp. is a well-known company. It has a well-established franchise in the front office storage systems market and a recognized brand name in the consumer market. The company's technology is focused on removable storage media, the best-known product being the Zip series of drives and media.
New products in the hard drive (HDD) area include multiple drive systems for the SMB (Small & Medium Business) and SOHO (Small Office & Home Office) markets. The hard drive market is very competitive but Iomega is holding its own due to its strong consumer franchise and well known brand name. At this time there is a shortage of disk drives and this will impact the fourth quarter.
Other storage products for the network attached storage market were introduced in the first half of 2007. These are both Windows and Linux compliant. Iomega now has the broadest line of SMB storage products of any storage manufacturer at competitive price points.
Buy Anesiva Pre-Zingo Launch
In the past several months, Anesiva (ANSV) has done the following things: gained approval for Zingo; unveiled its marketing strategy, prepared for the commercial launch in the second quarter of 2008; formed three alliances for Zingo -- the U.S., Europe and Canadian market; licensed technology to leverage the Zingo platform; finalized the phase III program for Adlea; and raised nearly $48 million in cash. We think things are going very well for Anesiva. Management continues to operate on plan and 2008 is shaping up to be a banner year.
Yet the stock has languished. Wall Street has yet to take notice, and we think that represents an attractive opportunity for small-cap biotech investors. We continue to see $12 as fair-value and we are reiterating our Buy rating and $12 price target.
Zingo offers significant advantages over existing therapies mainly due to its ease of use and its ability to anesthetize quickly. In fact, the approved label recommends physicians wait only one to three minutes before effectiveness in reducing pain prior to needle insertion. This is a significant advantage over lidocaine creams such as Emla or patches such as Synera that have onset delays of beyond 30 minutes.
In the hospital setting, this saves both the patient and physician significant time. With Zingo, physicians are able to treat patients in one quick visit as opposed to two visits over a 40-60 minute window.
Fundamentals Sound at Borg Warner
Borg Warner, Inc. (BWA) is expected to benefit from the growing demand for its strong technology-based product portfolio. About $1.95 billion of new power-train business is expected between 2008 and 2010.
