Capstone Turbine Corp. (NASDAQ: CPST) is set to report earnings after the close today.  Once again we caution that with many analysts new in covering this stock and with the size of the company that an steadfast or firm earnings estimates should be thought of as a rough guide rather than a formal map or yardstick.

First Call has estimates at -$0.05 non-GAAP EPS and revenues at $9.73M.  The company isn’t big on formal guidance, but estimates for next quarter are -$0.05 EPS and $11.76M revenues.  Fiscal March-2009 estimates are -$0.15 EPS on $64.45M revenues.  There are other key metrics below that are going to matter far more than exact earnings numbers.

This stock has been very volatile of late.  Its 52-week trading rangeis $0.91 to $4.42.  At $2.65 today it also has some very importantlevels to watch if you believe technical and charting analysis ispertinent in small cap stocks.  The 50-day moving average is $3.50 ifthis gets a huge pop on earnings, and if it continues with weakness oflate then you can look down to its 200-day moving average of $2.35 fora support level.

This stock saw added pressure last week after TheStreet.com ran a very harshpiece about the company last week as one of the alternative energy stocks that couldfall to zero.  We think their inclusion of this in the same grouping as ethanol stocks isnot fair nor really related; and the mention of all historic losses is true formany solid companies in alternative energy.  They have their opinionand we have ours.  We have ridden this up from $1.21 in November 2007in our weekly "10 Stocks Under $10" newsletter and the only profit taking we have called on was to take out the original cost basis after a 200% gain was reached.

Options trading in this stock was very active when it crossed above the$4.00 stock price, but that has backed off in options trading volumecompared to in prior months.  In fact, based upon all of the optionsactivity the only real issue worth noting is that at $0.30 or $0.35 thecalls with August expiration (this coming Friday) look fairly pricedfor traders seeking de-leveraged speculation with a 1 contract per 100shares risk.  Just remember that those expire Friday and if the stockfalls that the value goes to zero.

On the orders front, it is hard to not notice how much of the news flowfrom orders has tapered off since last quarter.  Since the last quarterit has announced five orders or distribution pacts that we have seen,and the stated face value of those contracts in the headlines was $9.7million.  Just keep in mind that those may be higher depending on theother announcements.  Its total backlog was $27.9 million as of the endof of March 31, 2008, which is likely sitting up after this reportcompared to last quarter and that was also possibly understated at the report.

Traders have really increased the bets against Capstone of late too.As of the mid-July settlements there were about 31.79 million shareslisted in its most recent short interest.  That represents almost 7days to cover, so any solid report or very strong comments could sendthe shorts covering.  The most obvious headwind it faces is that ofoil, and with many starting to call for $100 or under that is anobvious issue.

Jon C. Ogg
August 11, 2008

While Capstone is an ongoing position in our weekly "10 Stocks Under $10" subscriber newsletter, none of the officers of a673b.bigscoots-temp.com own shares of Capstone nor in other individual stocks.

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