"Between the twin drivers of the wind industry and the mandate for lighter autos, Zoltek (NASDAQ: ZOLT) is in good shape to ride the 'Alternative Energy Wave' in 2008 and well beyond," notes Toby Smith.

Here, the long-standing expert on emerging growth markets and editor of ChangeWave Investing, looks at the long-term prospects for this maker of carbon fiber.

"Zoltek earned $2.6 million in the fiscal Q1 (ended Dec. 31) compared with a loss of $5.7 million in the same quarter a year earlier. Sales rose $9.8 million, or 32%, to $40.1 million. Analysts at Thomson Financial had predicted sales of $46 million.

"The company missed its own sales prediction and Wall Street profit expectations because of customer plant shutdowns in Europe during the holiday season and customer inventory buildups. ZOLT's shares are now trading pennies above their 52-week low.

"The company still believes that it will meet its sales goals for 2008 -- and there are plenty of reasons to believe them. As one of the only suppliers of carbon fiber to the wind market, Zoltek is in good position to ride the growth in this alternative energy sector.

"Zoltek is also set to benefit from major changes occurring in the auto industry. The new energy bill signed by President Bush mandates tougher fuel-economy standards. One consequence of this will be that auto makers will be compelled to produce lighter vehicles.

"Industry analysts expect that the new rules will give producers of lightweight materials (i.e., carbon fiber) reason for optimism. During the next few years, automakers will be using an increasing tonnage of new materials to help meet the new mileage standards.

"While Zoltek is ramping up production to meet an anticipated surge in demand, the key to its longer-term success in the auto industry will be linked to lowering prices, which can only happen once it enters mass production.

"Despite the price setback, it is the multiple high-growth markets for ZOLT's carbon fiber that will ultimately be the driver that pushes shares to record levels. Take advantage of the sharp decline in the price of ZOLT and look to patiently build positions."