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, the current capital market situation may limit its stock price upside potential in the near future. Therefore, we are maintaining our Hold rating on LDK.

Beacon Roofing Keeps the Lid On

Beacon Roofing Supply, Inc. (BECN) reported a third quarter earnings of $0.41 per share, well above our estimate of $0.29 per share and the prior-year level of $0.26 per share due to higher sales and growth in margins. Going forward, while BECN benefits from market share gains, product mix, acquisitions, a scale-driven reduction in purchasing costs and other cost-reduction efforts, a slowing housing industry in the U.S. will adversely impact its sales and margins.

Moreover, the stock already trades at a premium to the industry median multiple, which adequately reflects the overall positive fundamental outlook. Hence, we retain our Hold rating on the shares of BECN.

The company?s branch-based business model optimizes revenue and minimizes cost. With a solid business model in place, the company executes its strategy to grow externally through acquisitions and internally through branch openings.

Historically, a large part of overall residential roofing demand comes from maintenance (re-roofing) than it does from new home construction. The management had stated that re-roofing is still doing well in Northeast regions, Mid-Atlantic, Canada, Texas and in Carolina. If this trend continues, it would be a positive development as we envision continued slowdown in housing starts this year.

The roofing industry is expected to grow at an annual pace of 3.5% out to 2008. We believe BECN can outpace industry growth on account of its geographical diversity, product mix, purchasing scale, and market share gains.

However, re-roofing demand has less cyclical fluctuation than does roofing from new homes. Sale of complementary building materials plays an important role in the company?s profitability. With further decline in house prices and less equity to tap for repair, end users are delaying project repair work on items outside of roofing such as doors, windows, and siding.

Acusphere a Speculative Buy

Acusphere Inc.'s (ACUS) balance sheet shows $12 million in cash as of June 30. The management has been actively looking at ways to reduce cash burn over the next three quarters while it waits for Food and Drug Administration's (FDA) action on its potential blockbuster product, Imagify.

Recently, Acusphere reduced headcount by 24% and cut salaries for senior management 10%. These moves follow restructuring IP payments and renegotiating manufacturing terms earlier in the second quarter.? However, these moves only delay what we see as inevitable.? Acusphere will need to raise cash before the U.S. Prescription Drug User Fee Act (PDUFA) date on Imagify of February 28, 2009. This will come from either signing a U.S. partnership or big stock offering.

Acusphere has developed Imagify with the intension of building a specialized sales force and promoting the product themselves in the U.S. The market for Imagify is over $2 billion, but a specialized sales force focusing on high-performing cardiologists/echocardiologists should be able to get the job done effectively.? However, an abysmal stock price and a desperate need for cash have backed management somewhat into a corner. Therefore, a partnership that brings about upfront funding seems to be the best option for the management and the shareholders right now.

Although a high-risk event (60/40 in-favor), we think Imagify can be approved in February 2009. Our financial model below forecasts U.S. sales of Imagify in 2012 of $494.8 million. Further, we see Acusphere being in position to deliver $1.46 in EPS in 2012.