Suntech Power: Keep This Stock On Your Radar

| About: Suntech Power (STP)

Suntech Power (NYSE:STP) reported fiscal 1Q07 numbers Tuesday. Here are the highlights:

• Net revenues grew 174.5% YoY to $246.7 million.
• Net income was $26.1 million.
• Margins continued to decline.

• 1Q07 - Gross Margin: 19.0% and Operating Margin: 10.9%.
• 4Q06 - Gross Margin: 22.3% and Operating Margin: 13.6%.

suntech logo- ASP will slightly decline in Q2.
- MSK acquisition hasn’t worked out so far. However, it’s too early to call it a failure.
- Credit Suisse downgraded the stock from ‘outperform’ to ‘neutral’ with a price target of $34.

The stock went up after the market opened but closed the day down 2%. The stock fell another 1.62% in after-hours.

Tuesday’s range was:

• Open: 36.41
• Range: 34.41 - 36.90
• Close: 34.56 (excluding after-hours trading)

The company expects gross margin to improve rest of 2007.

From Suntech Power’s Conference Call transcript:

Even though we had to rely more on spot market price for silicon than we would have liked this past quarter, our silicon purchase costs did decline. I feel that we are well on track to see our silicon purchase costs fall by about 10% from 2006 with most of that happening in the second-half of 2007.

Bottomline: Keep this stock on your radar. If you are long term investor, any further downside might be an opportunity to start a small position. The margins are expected to improve the rest of the year, polysilicon supply issues are going to continue to ease up, the high efficiency Pluto Technology seems very promising, thin film production line will be coming up online and the worse might be over with MSK. However, make sure you read the full conference call transcript or listen to the conference call before investing.

Disclosure: I have no position in STP but that might change anytime.

STP 1-yr chart:

STP 1-yr chart