If You Like Solar, LDK Is a Good Bet 32 comments
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LDK Solar (LDK) is a good long term buy at this price. LDK fell 15+ points yesterday. At the time of this writing (December 20, 2007), LDK Solar is priced at approximately $50. Its high of the week was about $75.
LDK was downgraded to sell yesterday by Piper Jaffray but was upgraded to strong buy by Needham & Co. It reported in line results for Q3 of 2007. However, its margins were clearly hurt. LDK’s “in line” results were on higher than expected revenue. The analysts’ predicted revenue was $143.2M. Actual revenue was $158.7M, a 5-fold improvement over the year ago quarter of $31.5M. Some quick math indicates that the margin for the recently reported quarter would be $41.6M earnings/$158.7M revenue = 26%. This is still a good margin. The analysts’ predicted margin was only 29% ($41.6M/$143.2M) for Q3, so it should not be that much of a disappointment. Is this 3% margin decline really worth $20 - $25 in the stock price? I think not. The concern is of course that the margins may fall farther. Indeed they may. Plus LDK has a lot of fixed price long term contracts. This is worrisome, but it is not necessarily bad.
Look at the total picture. LDK is ramping up production more quickly than predicted. Therefore earnings are still growing relatively quickly, even if margins decline a little bit. LDK has obtained financing for its polysilicone plant being built buy Fluor (a very reputable company). This is predicted to go on line in the second half of 2008. LDK already has or has contracted for a good portion of the polysilicone stock they will need for the first half of 2008. Originally the price of polysilicone was predicted to fall in 2008. It may rise, but it will likely not rise extremely quickly. LDK will be in the enviable position of being able to supply their own polysilicone in the very near future. This fact alone should allow them to have higher margins starting in the second half of 2008; and LDK’s production is expanding even faster than they predicted.
Why not wait to buy? Everyone else will have bought by then! Solar is one of the few bull markets still going. If you like solar, LDK is a good bet. Look how its last quarter compares to other solar makers:
Most of these companies will experience the same problems that LDK will experience. However, most of them do not have a huge polysilicone plant coming online in the second half of 2008. None of them were accused of accounting problems. However, LDK has been cleared of any illegal accounting by an external audit committee headed by a top U.S. law firm and supported by a big 4 U.S. accounting firm.
In addition LDK has ensured its growth with long term contracts. Solar prices are still predicted to fall over the long term. LDK is likely well off to have locked in “high” prices for its microcrystalline wafer production for the long term. LDK is growing quickly. LDK has a great business plan, which includes a vertical monopoly situation by having its own polysilicone plant. It has the financing already in place for this polysilicone plant. It has a CEO who was named Entrepreneur of the year in China (Mr. Peng). It should outperform the competition. I further point out that Needham & Co. has been more correct about LDK’s recent performance than Piper Jaffray has. It is a buy, if you are buying solar.
Disclosure: Author has a long position in LDK
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This article has 32 comments:
At the time they still hadn't been exonerated on the accounting issues. Once they were cleared of that the market's view of its riskiness changed completely and that's what set off the wild ride we've had since.
I am sad to say that I feel that a lot of unfair manupulation is going on in Wall st. to keep some Chinese stocks down, and Wall St. is playing like a sore loser to the Chinese market. Listening to some of the well respected CNBC commentators confirms that. But I think LDK will win eventually, and will be the main supplier of Europe and Asia. America, as usual, is lagging in showing interest in solar power .
I bought more yesterday as well around $50. Didn't time it quite right, but we're green today which makes me breathe easier. Right now this stock is not for the faint of heart.
1. "Solar is one of the few bull markets still going."/David white, author.
Which are the other bull markets?
2. Stockdude: "There are loads of companies coming on board now to make the unbelievable margins in the sector" Which are they?
I ask these questions because I would like to consider investing in some of the stocks/bull markets.
Thanks!
silicon is used to make solar cells and semiconductors,
silicone is used for things like breast implants...
Please e-mail me at RationaleResearch *AT* gmail.com. I'd like to link to this article on my website, and want your permission.
You are correct, actually on the way up there was the Q cells deal, bullishness over the Q3 results, and the accounting bill of good health. But I think the last one was what really kicked the price up into the 70s.
Definitely not a stock for the faint of heart, too. Seems like the slightest morsel of news sends it up, or down, 20%.
(I was lucky enough to have bought in at $35, took some profits near the top but am seriously considering taking advantage of this new drop to enlarge my position again.)
Anti-solar lobbyists (oil, coal, wind, etc) in Washington argue that the current solar tax incentives are going directly into the pockets of Chinese solar companies! This is a bad argument and hopefully congress will see the light.
If you are like me, and believe solar is the way of the future, then I suggest you email or write your congress(wo)men (as I have) in support of extending tax incentives for individuals and businesses installing solar. Margins will naturally shrink as new competitors enter the market.
Bottom line, if congress eliminates the tax credits, then new companies will be less willing to enter the market and prices will remain high.
Solar is a critical part of our future energy needs, and Congress needs to extend the tax incentives for at least 8 years.
i had numerical LOW 27 + high 77 ADD both high and low = $104 and divide by 2 ( long + short)= 44 U can call me crazy though lol.
Please read my comments here:
seekingalpha.com/artic...
And the other side of the story (the bad side for LDK):
www.fool.com/investing...
Published: December 31, 2002
The investment firm U.S. Bancorp Piper Jaffray, said today that it had agreed to pay $25 million and to change the way it does business to settle charges that it provided biased stock ratings.
Piper Jaffray said it had agreed in principle with federal and state regulators to resolve its part of an industrywide investigation into accusations that 12 firms misled investors by inflating stock ratings to help them investment banking business.
The case drew widespread attention when regulators uncovered e-mail messages at some firms in which analysts privately derided stocks they were recommending to the public.
Piper Jaffray and another investment banker, Thomas Weisel Partners, had held out while 10 others -- including Citigroup; Goldman, Sachs; and Credit Suisse First Boston -- agreed to pay $1.44 billion in a settlement on Dec. 20 with the New York State attorney general's office, which handled the negotiations. In addition to $900 million in fines, the firms will also pay $450 million over five years for independent research and $85 million for a nationwide investor education program.
In agreeing to the fines, the firms neither admitted nor denied that they had misled investors.
Piper Jaffray and Thomas Weisel had raised objections to the settlement and continued negotiations.
Besides the $25 million in fines, Piper Jaffray, which is based in Minneapolis, agreed to pay $1.5 million annually for five years. The firm said it had also agreed to make ''structural changes'' relating to its research and investment banking program, but it did not detail the changes.
Andrew S. Duff, the chief executive of Piper Jaffray, said in a statement: ''Since this process began, our regulators and we have shared the goals of reinforcing equity research independence, bringing about progressive changes to various industry practices and restoring confidence in the capital markets system. We believe this settlement will accomplish these goals.''
A Piper Jaffray spokeswoman, Erin Freeman, declined to comment further. The New York attorney general's office also did not immediately comment.
----------------------...
LDK guidelance for Q4 is $180-185 Million and it's a SELL?
Litigation Release No. 18113 / April 28, 2003
The Securities and Exchange Commission announced today that it has settled charges against Goldman, Sachs & Co.
As part of the settlement, Goldman Sachs has agreed to pay $25 million as disgorgement and an additional $25 million in penalties.
In addition, Goldman Sachs will pay, over five years, $50 million to provide the firm's clients with independent research, and $10 million to be used for investor education.
Specifically, the Commission's Complaint alleges that:
1) Goldman Sachs compensated its analysts based at least in part upon their participation in the firm's investment banking-related activities.
2) Goldman Sachs "aligned" its research, equities, and investment banking divisions to work collaboratively in order to fully leverage its limited research resources.
3) Goldman Sachs analysts participated in investment banking marketing efforts, including working with investment bankers to prepare "pitch" materials and in some cases attending the pitch meetings.
4) In several instances, these conflicts resulted in analysts publishing recommendations that were exaggerated or unwarranted.
5) Goldman Sachs failed to establish and maintain adequate policies, systems, and procedures reasonably designed to ensure the objectivity of its published research.
Published: August 6, 2004
The NASD, the brokerage industry's self-policing organization, told the Piper Jaffray Company to expect disciplinary action for several of its compensation arrangements with mutual fund companies, the company said. Piper Jaffray revealed the possible action in a filing with the Securities and Exchange Commission on Wednesday. The action relates to so-called directed brokerage arrangements, in which a mutual fund sends trading business to a brokerage firm in return for the brokerage selling shares in the fund to investors. Such arrangements are prohibited by NASD because the payments could lead brokers to pitch funds that are not suitable for all investors. Piper Jaffray is based in Minneapolis.
Semiconductor Analyst Chosen on the Basis of Stellar 2006 Recommendations and Performance
NEW YORK -- Needham & Company, LLC today announced that Pierre Maccagno, a senior research analyst in Needham's semiconductor group, received the top score as The Wall Street Journal's "Best on The Street" analyst in the semiconductor category based on his recommendations in 2006. The list appeared in The Wall Street Journal on May 21, 2007.
Three of Mr. Maccagno's recommendations cited by The Wall Street Journal were Anadigics (Nasdaq: ANAD), which produces chips for cell phones and other wireless products and returned 48% last year; Cree (Nasdaq: CREE), which makes light-emitting-diode chips for computer and cell phone displays and returned 35%; and STEC (Nasdaq: STEC), which packages conventional memory chips into data-storage modules and returned 236% in 2006. RF Micro Devices (Nasdaq: RFMD) is Mr. Maccagno's top pick for 2007.
The Wall Street Journal used Thomson Corporation's Thomson Financial division to calculate performance scores based on total return of each eligible stock an analyst followed and the number of stocks the analyst covered. Analysts also scored points for correct buy and sell recommendations. The winners in each category were drawn from 1,705 eligible analysts, based on data from more than 4,000 analysts at more than 280 firms. The Journal listed the top five analysts in each industry
beanieville.blogspot.c...
back up 9 trucks!
Back up 9 trucks!
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NEW YORK, Oct 17 (Reuters) - Piper Jaffray Cos (PJC.N: Quote, Profile , Research), an investment bank focused on mid-sized companies, on Wednesday said third-quarter operating profit fell 49 percent, hurt by turmoil in credit markets.
Earnings from continuing operations fell to $4.8 million, or 28 cents per share, from $9.5 million, or 50 cents, a year earlier. Revenue from continuing operations fell 20 percent to $92.9 million.
Net income fell to $4.4 million, or 26 cents per share, from $186.6 million, or $9.79 per share. Year-earlier results included a $177.1 million gain from the sale of Piper's retail brokerage to Swiss bank UBS AG (UBSN.VX: Quote, Profile , Research).
Analysts on average forecast profit of 53 cents per share on revenue of $114.3 million, according to Reuters Estimates.
"While our business is not focused on the most troubled aspects of the credit markets, namely subprime mortgages and (leveraged) loan commitments, the fallout from the turbulence in these markets negatively impacted nearly all of our businesses," Chief Executive Andrew Duff said in a statement. "We believe the adverse conditions were largely concentrated in the third quarter."
From continuing operations, investment banking revenue fell 28 percent to $52.5 million, hurt by a "sharp decline" in offerings from the consumer and health-care sectors. Institutional sales and trading revenue fell 11 percent to $38.8 million.
Piper shares closed Tuesday at $52.33 on the New York Stock Exchange. They have fallen 20 percent this year. (Reporting by Jonathan Stempel)
images.overstock.com/f...
GS targets LDK as a buy at 35$ because they have a strong position at FSLR: www.nasdaq.com/asp/Hol...
Now, remember that these were the guys that were selling mortages to their clients (telling them they were a good investment) while they were shorting them (because they knew they were a bad investment).
Since GS wants to make money out of their LDK investment they need to bash competition, because they are fearfull of it.
In www.chipstocktrader.co... an explanation of insider trading and manipulation is given.
At finance.google.com/gro... an explanation of why the stock got down to 45$. It's where max-pain is at (that is, where more options expire and institutions make more money).
"Spoke with analyst at Goldman Sachs 24-Dec-07 06:38 pm and another huge hedge fund in Manhattan. Both starting to understand the long term picture of LDK and Jaso. Hedge fund analyst noted the CFO of Jaso was "wonderful" and Goldman would over-look research for picking up LDK now that the pricing model seems in line. The only question will be "margins for ldk". The goldman sachs analyst noted this could "be the beginning of alternative energy bull market" that lasts for years.
I simply believe the analyst at Piper already had his mind made up on shares of LDK before the earnings report was even announced. One thing that is certain is LDK will need to improve it's PR and conference calls to provide more clearity to analysts.
Both Piper and GS like LDK, but if you put a market perform or out perform rating on a company such as LDK now, it's like awarding a gold medal to someone who's already finished the race. LDK needs to live up to Wall Street expectations and a "sell" rating will make the CEO not work 12 hours a day, but more like 18 the coming quarter. Wall Street does this by giving them a sell meaning get "to work". The same situation occured with BIDU where GS and Piper put "underperform ratings" on the stock it's first few quarters. Nothing wrong with putting a company in shape. LDK will come back strong, and no PIPER and GS don't "hate LDK", they love LDK , but want everyone at the company to work hard so that by end of 08' we'll be +100 stock. "
If LDK stock performance mirrors BIDU's, it will do extremely well.