Will Exide's Run Continue?

I was doing research on another stock and looked up Exide Technologies (XIDE) as a "comp". What I found was so interesting and compelling that I changed plans and decided to write about Exide instead.

Exide Technologies is a global manufacturer of lead acid batteries for transportation and industrial applications. Operating in over 80 countries worldwide, Exide Technologies provides a comprehensive range of stored electrical energy products. Here is the link to their website.

As you can see from the chart below, it has been on a very wild ride of late and that is what caught my attention.

Look at that "hockey stick"! Exide Technologies had dropped precipitously in the month of June bottoming out at $3.03 in late June. A small rally in early July was wiped out in a few days and the stock dropped again, this time to $3.20. Since then the stock has had very few down days on its march to topping out at $6.46 on August 7th. The momentum has stalled and Exide Technologies stock has traded sideways in the past few days.

The chart indicates that the stock is "overheated" with both the RSI and Stochastics at or above key levels. While the MACD is still bullish, the MACD histogram shows that the bullish trend is losing strength and momentum. The volume has remained consistent over the past few days which is a good sign that the stock could rise from here.

The question that is begging to be asked is "what will happen to the stock....will it rise or fall?"

From a financial perspective, several conflicting storylines emerge. The company has not posted an operating profit for the last two quarters. Exide Technologies would have posted a small operating profit but for the approximately $70 million in restructuring charges,

However, the balance sheet is relatively strong (a/o 6-30-09). The company, which emerged from bankruptcy in 2004, seems to have avoided the debt trap that sunk Exide the first time around, but is still highly leveraged. They had, until this past quarter, been aggressively paying down debt, but they still have over $650 million in L-T debt. Cash and Equivalents are $121 million and the quick ratio is about 1:1. A disturbing fact is that the company is subject to a great deal of interest rate risk. Over half of their current debt structure is floating rather than fixed.

The best news (and the brightest hope for their future) comes out its alliance with Axion Power (AXPW.OB), a development stage company that has patented the next generation of lead acid batteries called "lead-acid-carbon". These batteries replace the toxic lead components of batteries and replace them with a carbon composite. The new chemistry allows for less toxicity, lighter weight, greater power delivery rates and faster recharge rates. It is Exide's intention to compete with Lithium-Ion and other storage technologies within its traditional markets and in the burgeoning "green" markets - industrial power, Military Power, Hybrid and Electric-powered vehicles.

As a further seal of approval, the joint venture between the two firms recently received stimulus money in the amount of $34.3 million to begin manufacture of this next generation battery.

I am taking a "wait-and-see" attitude with Exide Technologies. The chart pattern has not declared itself yet. It appears that all of the good news of late has been priced in to the stock. If one is to trade this stock, it might be best to keep a very tight stop on it. The stock appears to be at a "tipping point" and, if its past volatility is any indicator, it could go either way.

Disclosure: No Positions

Comments

[jerrydd:]

While Exide has been a darling lately it seems, it's a badly run companies that make inferior products and always on the losing side of legal problems.

Nor has Axion's carbon/lead battery proved itself in any way and no more than a few have been made. The price savings is small if at all with Lithium batteries which weigh 1/2 as much.

If I had my money in this stock I'd get it out now while it's high as XIDE always crashes.

Aug 16 11:56 AM

[John Cordes:]

ABAT, Lithium Ion, Wuxi electric cycles, ZAPP collaboration, positive PE, little debt, core business in miners' lamp batteries and notebook batteries, and enjoys favorable tax treatment from the government. Slightly beat estimates but forcast a near doubling in next quarter revenue.

Aug 16 12:14 PM

[battman:]

Way to go Jerry, you should eliminate the dd from your name because you speak with no apparent knowledge (as opposed to one had actually done any dd on a company).
Exide is one of the largest lead acid battery manufacturers in the world, and with the alliance with Axion, who the government found warranted giving them 34 million, is on the verge of great things. In terms of your wonderful quote that there probably isn't any savings when it comes to Axions PbC and lithium, well that just goes to show how little you know. If you spoke out of your mouth and not the other end, you might make some sense once in a while.


On Aug 16 11:56 AM jerrydd wrote:

>
> While Exide has been a darling lately it seems, it's a badly run
> companies that make inferior products and always on the losing side
> of legal problems.
>
> Nor has Axion's carbon/lead battery proved itself in any way and
> no more than a few have been made. The price savings is small if
> at all with Lithium batteries which weigh 1/2 as much.
>
> If I had my money in this stock I'd get it out now while it's high
> as XIDE always crashes.

Aug 16 07:24 PM

[ari5000:]

Don't be too hard on the guy. This is actually a decent article, relatively speaking, for Seeking Alpha.

But yeah -- as usual... rather light on actual DD.

Aug 16 09:41 PM

[jerrydd:]

Battman,
I'm an EV person who depends on quality batteries to make our EV's work. And for decades Exide has been the pits in quality and such bad legal scams some officers went to jail. Their batteries regularly die in 1/2 the time others quality companies like Trojan, Deka/EastPenn or Trojan who cost about the same but all far cheaper/mile than Exide junk.

So where are those CL batteries? They have been at it for a decade and no CL batteries yet. As they say, all hat and no cattle.

As for Li pricing we now buy LiFePo4 batteries in EV sizes for $.30/wthr, less than quality sealed lead batteries now cost. What's up with that?

These are all hard facts vs your feelings, predictions. Invest in Exide is just not wise.

Aug 18 08:01 AM

[jerrydd:]

PS, DD was because jerryd was already taken, not due diligence which I assume you take it to mean.

However your DD is rather poor Battman which from your lack of any real knowledge on the subject from this and other posts means you should remove batt from it.

Learning about batteries from press releases is not a wise move. kind of like believing a used car salesman or someone from Enron..

Aug 18 08:09 AM

[exidesux:]

well my comment has nothing to do with axiom or exide's new ventures. i am a former employee of Exide and i would like to say i agree that Exide has poor quality and i don't care if they are one of the biggest battery companies .it is a badly run company i was there for 8 yrs and they cut the work force considerably it went from 900 to 300 .while i was there just 8 yrs there where 4 plant managers and countless others let go. yeah i might be biased because i was laid off but i was on the inside and i know this company doesn't have a clue what they are doing and probably never will. they have had inferior equipment and ridiculous production demands ..its insane and frankly I'm glad i do not work there anymore

Sep 09 05:09 AM