- UBS notes they estimate that MEMC will likely meet its 4Q06 revenue guidance of $410-$415M (they estimate $415M, +2% q/q). Firm's channel checks found overall 200mm and 300mm prime semiconductor wafer prices increased, on average, 5% q/q as DRAM customer strength offset foundry customer weakness.
Firm's discussions with industry contacts found that MEMC just began selling "semiconductor grade" (higher quality) polysilicon for the first time last quarter as semiconductor wafer sales visibility remains limited in 1Q07. Channel checks found solar customers are paying $325-$350/kg for semiconductor poly (higher than the $200-$250/kg being paid for solar grade poly).
UBS' channel checks suggest 1Q07 semiconductor wafer volumes are-2%q/q and prices are +3%q/q. While MEMC likely benefits from solar wafer sales (mostly to Suntech) for the first time in 1Q07, firm's industry research found MEMC could benefit from increased market share at Intel as their discussions with industry contacts suggest one of Intel's 300mm wafer suppliers is sold out in 1Q07.
Maintains Buy and $60 tgt.
- FBR is saying they expect WFR to exceed firm's revenue/pro forma/GAAP EPS estimates of $414M/$0.58/$0.40, compared to the revenue guidance range of $410M-$415M and the consensus of $416M. Due to higher sale of poly in the spot market, they also expect the company to exceed their gross margin estimate (and guidance) of 48%.
Firm expects the solar wafer contracts with Suntech and Gintech to start contributing meaningful revenues in 2H07, although they note that these revenues will have a lower gross profit than the sale of poly in the spot market. These, combined with an acceleration of semi wafer capacity, as well as the initial capacity installation for in-house solar wafers manufacturing, are expected to lead to limited upside margin.
Investor expectations are for consensus CY07 pro forma EPS to increase to "at least" $2.80 (or so), versus FBR estimate/ consensus of $2.24/$2.55, but they this unrealistic. They applaud the company's flexibility in shifting capacity from semi to poly and vise versa, driven by the directional changes in the demand environment, but with increased industry supply and in-house overhead expenses, especially in 2H07 and beyond, they believe the magnitude of upside to consensus is limited.
Maintains Mkt Perform.
Notablecalls: I think UBS trumps FBR here. The chart looks like it wants to move higher.