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: Amylin Pharmaceuticals, Inc. (Nasdaq: AMLN), Sony (NYSE: SNE) and MannKind (Nasdaq: MNKD).
See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673
Here are highlights from Tuesday’s Analyst Blog:
Tougher Times Ahead for Amylin
Amylin Pharmaceuticals, Inc. (Nasdaq: AMLN) is engaged in the discovery, development and commercialization of potential drug candidates for the treatment of diabetes, obesity and cardiovascular diseases. The top-line is being driven by sales of two diabetes drugs, Byetta and Symlin. Sales of both drugs were lower than expected in the most recent quarter due to heavy sampling and increased competition.
We think the competitive landscape is only getting worse for Amylin, and despite the fact that we are enthusiastic about the early-to-mid stage pipeline, we feel the name is overvalued. Amylin trades at 50x our 2010 EPS estimate of $0.92. This is a significant premium to the peer group. We would avoid the name. Our target is $36.
Based on our long-term earnings model -- which we believe to be generally in-line with consensus -- the stock is significantly overvalued at $48 per share. We project $0.92 in EPS in 2010 based on $1.6 billion in total revenues. This equates to a forward P/E ratio of 52.5x, well above the peer group which currently trades around 18x 2010 EPS.
Sony Still Warrants a Sell Rec
We believe Sony (NYSE: SNE) will continue to struggle as it faces competition from innovative digital products and struggles to ramp production of its PlayStation 3. In addition, Sony is facing increasing competition from low-cost manufacturers in Asia as the consumer market slows.
We therefore maintain a Sell recommendation on SNE shares with a price target of $38.00. Although Sony maintains strong distribution channels and a brand name, we would avoid the stock until the company demonstrates sustainable improvements in results.
Our six-month price target of $38.00 reflects a P/E multiple of approximately 14.6x our estimated fiscal 2007 EPADR of $2.60, which we believe is a reasonable discount to the S&P for a company in Sony's position. In spite of its difficulties, Sony is currently trading at 18.0x estimated fiscal 2007 ending March 31, 2008 EPADR.
Difficult Times for MannKind
MannKind (Nasdaq: MNKD) is a biopharmaceutical company focused on the discovery, development, and commercialization of therapeutic products for diabetes, cancer and inflammatory diseases. Its lead product, the Technosphere Insulin System for the treatment of diabetes, is in phase III trials in the U.S.
We believe Technosphere has certain intriguing beneficial characteristics that could make the product a success. However, the company has been unable to find a partner for the drug, competition is fierce in this field, commercialization is still at least three years away and the company is burning cash at too high a rate.
We downgrade the stock from Hold to Sell with a revised target price of $6.00. Our target price is derived from our estimated total revenue of $113 million in 2010, multiplied by a P/S [price-to-sales] ratio of 10.0x and discounted back at 25% for three years (assuming weighted average number of shares of 97 million).
See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645.
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