LTX Drops on Weak Guidance, Poor Sales

On Tuesday, the company guided for second-quarter revenue between $28 million and $32 million and a loss per share of 4 cents to 7 cents, worse than the average analyst estimate $34.5 million in revenue on a loss of a penny per share, according a poll by Thomson Financial.

Lehman Brothers analyst David Egan, said in a note to investors that he was more negative on the company's near-term outlook. He cited lower-than-expected quarterly guidance, at least two more quarters of anticipated losses and a risk to the timing and size of a recovery from LTX's main customer, Texas Instruments Inc., which accounts for about half of LTX's revenue.

Egan lowered his price target from $4 to $3.

Egan said revenue is expected to remain "weak and flattish" in the current quarter. "We believe weakness in wireless chipset business of Texas instruments remains a headwind and could persist beyond current expectations of recovery in the July 2008 quarter," he added.

Citi analyst Timothy M. Arcuri described the guidance as "disappointing" but said he was sticking to his "Buy" rating and said he believed testing equipment sales should be much better in 2008.

He also said LTX remains a solid buyout candidate. "While LTX is now losing money, it has undergone a full cycle in which it made significantly more money in the upturn that it is losing on the downturn," he said.

Stifel Nicolaus & Company analyst Patrick Ho said in his note to investors that the stock has been "way oversold" given the improved company fundamentals when compared with previous cycles.

"Although we believe this is the fundamental bottom for the company, we are not anticipating any sudden turnaround in industry trends," he said.

LTX stock dropped 24 cents, or 8.7 percent, to $2.51 in morning trading Wednesday. It has traded between $2.35 and $6.92 in the last year.