LDK Found Error-Free, Rises 30%: Where is the Solar Rally?

Well in a surprising development, not one iota of error in the LDK Solar (LDK) report, and the stock went back up to mid $70s.

If this is indeed the fact, a certain controller needs to be formally sued for causing so much damage to so many shareholders. The stock went back to where it was before this whole circus started.

• LDK Solar Co. said Monday its investigation into whether it had incorrectly reported its silicon inventories found "no material errors" in the inventories. The solar-product maker's investigation stemmed from allegations of its former financial controller, Charley Situ, that LDK had a 250-ton inventory discrepancy and poor financial controls.
• The company said Situ did not take into account all the locations where the company stores its silicon -- an important component of solar products. It also concluded that a provision for obsolete or excess silicon is not required because LDK is using each of its silicon types in wafer production.
• The company will report its third-quarter results, which had been delayed as a result of the investigation, on Wednesday.
• Outside directors Louis Hsieh and Bing Xiang oversaw the investigation, which was conducted by the audit committee's independent counsel Simpson Thacher & Bartlett LLP and an accounting firm that was separate from the company's external auditors. Independent experts in the evaluation of silicon feedstock and the production of multicrystalline solar wafers also assisted.

Again pending the news I had just a small position (tiny in fact) in this name; now on any pullbacks, this is a buy. I will be very curious to see if Wednesday they still report gross margins in the low 30s, which was the case in the past before these allegations came to the forefront.

What is unusual is this is not driving other solar stocks upward, as this sort of news generally creates euphoria across the sector. Might indicate the sector is currently 'tuckered out' after a huge run and needs to consolidate here.

Disclosure: Long LDK Solar in fund; no personal position

Comments

[jpoozler]

I told you so. Should have listened to me and made a lot of money.

2007 Dec 19 12:39 AM

[pprimo]

I see now reason why a laggard catching up should create a euphoria rally in the entire sector. I'm always amazed at some of the stuff I see here with tenuous links or hypothesis at best.

2007 Dec 19 01:04 PM

[alpha24seven]

Where is the solar rally? That about says it all...

2007 Dec 19 01:29 PM

[TraderMark]

I think the intent of my comment is being misconstrued by the title. The fact LDK did not set the sector on fire is indicative of me of a tired group. As to the person asking why "should it?". I am not saying it should - I am saying in the past even the slightest minor news that means almost nothing set the entire sector to make 20-30% moves as speculators move into the stocks.

At this point the sector looks over extended to me; I remain cautious on the group and hope to be buying at lower prices in the relatively near future. But as long as the market holds up, speculators remain stuck in the names and won't let go.

2007 Dec 19 02:17 PM

[oceandude]

It will go down after earnings were merely in-line. Margins still barely over 30%.

I'll be backing up the truck, poised for a big 2008 gain!

2007 Dec 19 07:45 PM

[TraderMark]

Frank looks like the way to go. I have started adding today with some more exposure an will be looking to add more if we get to $46-$47 level - a nice gap in the chart coinciding with 50 day moving average. I dont think the stock was $70 was pricing in 30% or so gross margins. But in the 40s and 50s we take some of the headline risk out. I expect margins based on the CC, to fall to upper 20s in near term, but still not bad considering the revenue growth. Of course those mid 30s would of been even better but spot polysili is now pricing at $400 kg! amazing.

2007 Dec 20 12:14 PM

[stockguru]

why does wallstreet hates ldk? margins for other solars will also go down!! atleast their margins are higher than others!!!

2007 Dec 22 07:09 PM

[stockguru]

PJ upgrades jaso and downgrades ldk????? sumthing is fishy here!!!

2007 Dec 22 07:10 PM

[TraderMark]

I think Qcells gives us the assurance we need. Analysts are analysts - take what they say with many grains of salt.

2007 Dec 24 01:13 PM