A Sunny Outlook For Emcore - Barron's

| About: EMCORE Corporation (EMKR)

A small solar-power company, Emcore's (NASDAQ:EMKR) shares have fallen 75% this year on growing losses, but Barron's Mark Veverka says this has only made the company more affordable and the outlook for Emcore's new concentrated photovoltaic, or CPV, technology remains bright.

CPV is the next step in the evolution of solar technology, allowing for the creation of more energy per square-surface area at a lower cost than today's technology. CEO Hong Hou expects the CPV business to start accelerating in the next 3-6 months. However, the company does more than CPV. It has a telecom fiber-optics business expected to generate FY 2008 revenue of $185M, while its solar business, which extends beyond CPV technology, could generate around $80M this year. Emcore's fiber-optic and solar-satellite operations together are worth around $310M, just above the company's $303M market capitalization, which means Emcore investors are getting an option on promising CPV essentially for free.

Still, Emcore's success is not a sure bet. The company lost $58.7M in its most recent fiscal year, solar technology is changing rapidly and 44% of the company's publicly traded shares were sold short as of last month, partly because of Emcore's lack of established clients. One hedge fund managers explains, "You don't analyze this company on a quarter-by-quarter basis. It is a venture bet on a promising and demonstrated technology that could be worth billions. You either believe that CPV will be a huge market, or you don't. And if you do think CPV is real, then Emcore is the de facto winner, period."

As a positive sign for Emcore's future, better-funded venture-capital-backed companies, like Soliant Energy and Canada's Menova, are now signing on. Soliant is partially backed by GE Energy Financial Services (NYSE:GE), while Menova is working with Ontario province and Wal-Mart Canada. A growing pool of established clients could help buoy the stock. An investment-tax credit aimed at helping the solar industry just got an eight-year extension as part of the Congressional bailout bill, and "that's good news for Emcore because its technology is suited to [big-budget] commercial projects," says clean-technology analyst Chris Chaney. Chaney has a Buy rating on the stock and a $10 price target.


  • Earlier this month, Emcore secured $25M in financing from Bank of America for working capital, letters of credit and other general corporate purposes.
  • Emcore (EMKR): Q3 EPS of -$0.04 misses by $0.01. Revenue of $75.5M (+70.0%) vs. $78.5M. [PR]