Affymetrix: a Better Bargain?

04/18/2003 12:00 am EST

Focus:

John McCamant

Editor, Medical Technology Stock Letter

"The biotech sector has been on a roller coaster; indeed the sector is one of the more volatile rides on Wall Street. But long term, we believe investors will be pleased at the investments they make at these prices. Affymetrix (AFFX NASDAQ) warned that first quarter revenues would come in $11 million short of their original guidance of $71-$73 million. The firm cited worldwide economic weakness and more cautious capital spending. Salomon Smith Barney downgraded the stock and the issue took a substantial haircut, losing about 35% of its market value on the day. Meanwhile, management has done an excellent job of continuing to build shareholder value and deliver to their shareholders. We continue to give them a vote of confidence that they will weather this setback.

"Further, while the drop in first quarter revenues is not good news, the cut in the market capitalization of the stock is overdone and demonstrates the difficult environment we are in. We are lowering our buy limit on AFFX to $23. Our opinion of the stock remains the same, and we continue to hold the stock in our model portfolio. We still think AFFX has tremendous upside potential and we think this is going to turn out to be one of the better buying opportunities of the year. In fact, we are adding shares to both our model portfolio and our aggressive portfolio. Our long-term target if $55."

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