BlueStone Capital Announces Investment Opinion: Downgrades Candela Corporation to 2-1 from 1-1.

Business Editors

NOTE TO EDITORS: The following is an investment opinion issued

by BlueStone Capital

NEW YORK--(BUSINESS WIRE)--Oct. 25, 2000

Senior Analyst Scott Baily downgrades Candela Corporation (CLZR; NASDAQ-$6.84) to 2-1 rating (Outperform / Outperform). The intermediate price target is $12 and the long-term price target is $20 according to the analyst.

Analyst's Summary

-- Following CLZR's disappointing first fiscal quarter performance, we are
lowering our revenue and EPS estimates for fiscal (June 30) 2001 and fiscal
2002. Due to the current uncertainty of CLZR's next few quarters, we are
downgrading our rating on CLZR's stock to a 2-1 rating from our previous 1-1
rating. In addition, we are revising our intermediate term and long-term price
targets to $12 and $20, respectively, from $20 and $27.

-- For the fiscal first quarter ending September 30, 2000, CLZR's sales and EPS
were $13.1 million and $0.01, respectively, versus $16.0 million and $0.19
during the first quarter a year ago. We had been estimating revenues $18.0
million and EPS of $0.20 per share (EPS results are fully diluted and assume a
fully taxed rate of 34%-35%). Management indicated that CLZR's disappointing
results in the first quarter were due to a combination of factors that included
the seasonally slow first quarter, which was exacerbated due to a delay in
orders caused by a longer evaluation process by customers (primarily in the
vascular market) as well as the strong dollar in Europe and Asia.

-- Other notable highlights of the quarter included: 1) CLZR's gross margin it
the first quarter declined to a still respectable 50.5%, down from 57% last
year, driven by both lower volumes and some pricing pressure in both the hair
removal and vascular markets; 2) management announced that the first of its two
new products, the SmoothBeam, a diode laser that is on target to be launched in
late January, and is intended for the nonablative skin rejuvenation market; 3)
the geographic breakdown of CLZR's revenues in the first quarter remained in
the 50/50 range of domestic to international sales; 4) sales from its PSSI
World, Inc. (PSSI-NASDAQ-$3.03-Not Rated) in the first quarter remained at the
14% range, or about 1.8 million; 5) management indicated that with the stock at
its current levels that the company would continue with its stock repurchase
program. CLZR's board of directors has approved a repurchase program of up to
750,000, of which approximately 500,000 shares are still left to be
repurchased.

-- Our revenue and EPS estimates for fiscal 2001 have been lowered to $77.6
million and $0.77 per share, respectively, down from our previous estimates of
$88.1 million and $1.13 per share. Our new estimates for fiscal 2001 reflect
the uncertainty of how much of the delayed revenues that were not booked in the
fiscal first quarter can be shipped in the fiscal second quarter, as well as
overall growth of the aesthetic laser segment, and the timing of new product
launches. We believe the visibility can improve once we know better of how well
the new products are received and in which quarters the revenues from these new
products will be felt in second half of the fiscal year. For fiscal 2002, our
new estimates are for revenues of $90.5 million and EPS of $1.06 per share,
which were reduced from our earlier estimates of $102.5 million and $1.32 per
share, respectively. Our new and previous EPS estimates assume a tax rate
between 34%-35% in both fiscal 2001 and 2002.

BlueStone Capital is a full service investment banking and brokerage firm focused on identifying investment opportunities in the emerging growth sector. BlueStone Capital assists clients in maximizing their growth by providing sophisticated investment strategies that are designed to achieve clients' strategic, operating and financial goals. Member NASD, SIPC, and ISMA.