Evergreen Solar: Weak Q1, Running Out of Cash

| About: Evergreen Solar (ESLRQ)

Evergreen Solar (ESLR) shares are down sharply after the company late Thursday posted disappointing Q1 results, which featured shrinking margins and lackluster comments on near-term demand.

Adding to the pressure, Raymond James analyst Pavel Molchanov responded the report by cutting his rating to Underperform from Market Perform. Molachov writes that the company’s “ultra-slim” 1.2% gross margin in the quarter “illustrates the challenges facing higher-cost PV producers such as Evergreen.” He notes that the company’s string ribbon approach cuts poly utilization by up to 50% versus conventional approaches, but that “the company’s non-feedstock manufacturing costs have continually exceeded industry averages.” With poly prices in a meltdown, he notes, the higher processing costs presents a competitive issue.

He also notes that the company is down to $57 million in cash, and that a capital infusion is likely to be required soon.

Meanwhile, Canaccord Adams analyst Jonathan Dorsheimer Friday repeated his Sell rating on the stock, trimming his price target to $1.60, from $1.75. He also noted that the company’s cost structure remains uncompetitive, and echos Molchanov’s view that a capital infusion is likely to be required. He also asserts that the company is offering “overly aggressive expectations,” and that it has “a history of missed expectations and poor capital management.”

Macquarie Research analyst Kelly Dougherty reiterated an Underperform rating on the stock, with a new target of $1.25, down from $2.25. Doughtery has doubts about the company’s long-term viability. “We remain extremely concerned about ESLR as a going concern, especially over the next several quarters before getting the Chinese manufacturing benefit,” Dougherty writes, alluding to a deal unveiled yesterday to outsource some production to China. “Given the tight liquidity situation, management hopes to raise [about $100 million]. While we believe that will be quite difficult, it is imperative for survival, in our view.”

ESLR Friday is down 29 cents, or 11.9%, to $2.14.

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