Citi: MEMC May Miss Lowered Guidance, But It's Still a 'Buy'

Could MEMC Electronic Materials (WFR) Q4 results whiff even their downwardly revised guidance?

Citigroup’s Timothy Arcuri thinks so. Tuesday morning, he asserted that the company could miss the low end of its guidance for revenue of $475 million to $525 million, due largely to ongoing weakness in the semiconductor business, particularly in Taiwan. He cut forecast for the quarter to $460 million in revenue and 68 cents a share, from $494 million and 79 cents. He also slashed his Q1 EPS forecast to 38 cents, from 68 cents, and now sees 2009 EPS of $2.69, down from $3.68, which by the way compares to his 2008 estimate of $3.29. For 2010, he goes to $3.65, from $4.64. (Note that for 2010 he is still way above the Street consensus at $3.41.)

He slashed his target on the stock to $30, from $50, but maintains a Buy rating, and asserts that Q1 should be the “worst of the bad news.”

Meanwhile, here’s something to think about for the long haul: Hemlock Semiconductor, a joint venture operated by Dow Corning (which itself is owned by Dow Chemical (DOW) and Corning (GLW)) and two Japanese firms, Shin-Etsu Handotai and Mitsubishi Materials, has unveiled plans to invest up to $3 billion to build new polysilicon production capacity in Hemlock, Michigan and Clarksville, Tennessee. Together, Hemlock intends to add up to 34,000 metric tons of polysilicon capacity. Hemlock said its capacity at the end of the current year will be about 19,000 metric tons. There are two ways to look at this added capacity, which is specifically targets at the solar market: on the one hand, it should provide a new source for the key raw ingredient in the production of silicon solar cells. And on the other hand, poly prices are currently in free fall due to excess capacity; for the moment, at least, more capacity is not what the market needs.

WFR today is up 17 cents, or 1.2%, to $14.92.