Zacks Analyst Blog Highlights: Third Wave Technologies, Hologic, Focus Media, Allegheny Energy and American Electric Power

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: Third Wave Technologies, Inc. (Nasdaq: TWTI), Hologic, Inc. (Nasdaq: HOLX), Focus Media Holding (Nasdaq: FMCN), Allegheny Energy Inc. (NYSE: AYE) and American Electric Power (NYSE: AEP).

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Here are highlights from Tuesday's Analyst Blog:

Hologic Buying Third Wave Tech

We keep our Hold rating on Third Wave Technologies, Inc. (Nasdaq: TWTI). On June 9, Hologic, Inc. (Nasdaq: HOLX) announced it will acquire TWTI for a purchase price of $11.25 per share, or approximately $580 million. The transaction will be completed by the third quarter pending regulatory and shareholder approval.

The molecular diagnostics field is experiencing explosive growth, driven by a wave of information emanating from the study of the human genome and the concurrent development of analytical techniques aimed at harnessing this data. We believe TWTI is well positioned to exploit current market opportunities, given its technology and existing client base.

However, TWTI's operating history in the area of molecular diagnostics is limited relative to other industry participants. In addition, the company's customer base is highly concentrated. Dependence on a small number of customers for its revenues increases the risk of earnings volatility.

Chinese Earthquake Affects Focus

Focus Media Holding (Nasdaq: FMCN) announced strong revenue growth for the first quarter. However, its performance in the second quarter will be negatively affected by the Sichuang Earthquake.

FMCN is well-positioned to leverage the great growth opportunity of out-of-home and Internet advertising market in China. We think its current stock price doesn't reflect the company's growth prospects. Therefore, we are maintaining a Buy recommendation on FMCN's stock.

It is estimated that outdoor media accounted for around 12% of the total advertising spending in China. According to ZenithOptima, the compounded annual growth rate (CAGR) of outdoor media in China in the next three years is 20%. The potential opportunity for online usage in China is huge. The market should generate a CAGR of about 15% for the next five years. According to iResearch, online brand advertising business in China will grow to RMB 37 billion yuan in 2011.

Good Overall Return on Allegheny

Going forward, Allegheny Energy Inc.'s (NYSE: AYE) positive investment factors include growing earnings, increased market prices, higher generation rates in Pennsylvania, increased retail sales long-term supply agreements, and a reinstated dividend. These factors are partially offset by higher coal costs and decreased rates in West Virginia.

We expect that the company's regulated delivery utility business will provide steady earnings growth, while the generation business will provide an additional boost to earnings. Accordingly, we maintain a Buy recommendation on AYE common stock with a six-month target price of $60.25. Price appreciation to our near-term valuation target, coupled with the recently declared quarterly cash dividend of $0.15 per share after a gap of five years, which we deem sustainable and secure, represents annualized total return potential of 31.0%.

AYE has a series of transmission expansion plans, as well as plans to engage in wind energy. In order to secure its coal dependency, the utility had supply commitments in place for over 95% of its 2008 coal requirements. The company also recently received favorable regulatory rulings.

Additionally, AYE received investment grade credit ratings from Moody's Fitch and Standard & Poor's. The PJM also recently approved Allegheny's Potomac-Appalachian Transmission Highline (PATH) transmission project. The company also finalized the TRAIL project agreement with American Electric Power (NYSE: AEP).

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