Is the Ship Coming in for American Superconductor?

I've been doing a lot of work the past month on finding alternative energy plays that do not have to do with solar, and I found a few names and now have a new watchlist. Most of these stocks are much smaller than the standard fare I buy, so I am being cautious and waiting for some of these stocks to pull back in price, but they have been extraordinarily strong even with these selloffs 2 of the past 3 weeks.

American Superconductor (AMSC) is actually a name a reader brought up to me a month or so ago when we were asking for some new ideas. This is not a new name to me, but after watching the stock, I had to take another look. It is like Energy Conversion Devices (ENER) May 8: Energy Conversion Devices - Is the Turnaround Finally Here?]. But we've seen how the ship has appeared to come in for ENER, and perhaps the ship is coming in for controversial AMSC as well.

They received a huge follow up order. This appears to be a 3 year contract for $450 million. Considering the company is only doing under $200 million in revenue in total this year, the magnitude of this contract is enormous for this size of company. The stock performance reflects that. (congrats to the reader who owns this!)

(asI highlighted in early May in the upper $40s, and is now in the mid $60s) this has been a "hope" company for a long time - long on promise, but short on execution.

• American Superconductor Corporation (NASDAQ: AMSC - News), a leading energy technologies company, today announced that it has received a $450 million order from Beijing-based Sinovel Wind Corporation Limited for core electrical components for 1.5 megawatt (MW) wind turbines.
• The contract calls for shipments to begin in January 2009 and increase in amount year-over-year through the contract’s completion in December 2011.
• AMSC’s wind turbine electrical systems and core electrical components include the company's proprietary PowerModule™ power converters. They enable reliable, high-performance wind turbine operation by controlling power flows, regulating voltage, monitoring system performance and controlling the pitch of wind turbine blades to maximize efficiency.
• “Sinovel is the epitome of business success in China and is one of the fastest growing wind turbine manufacturers in the world,” said Greg Yurek, founder and chief executive officer of AMSC. “The core electrical components covered under this contract will be used to support more than 10 gigawatts of wind power capacity, nearly double China’s total wind power installed base at the end of 2007. It is invigorating to see Sinovel’s success in bringing much needed electrical generation capacity to the Chinese power market at a crucial time in that country’s expansion. We are proud to work in tandem with Sinovel on this important endeavor.”

Again there are some tertiary "wind" plays that people are hyping, but I am familiar with most of them, and they generally are either not pure plays or don't exactly have the type of management you can trust to execute. So I've been digging deeper to find some more ideas and have a handful now - I just would prefer the stock prices to falter so I can get better prices. Maybe the next time oil "implodes" to $120.

Specific to American Superconductor - again this has been a long time "hope" stock, full of promises... I remember it even from the late 90s when it spiked along with the rest of the "hope" stocks (Fuelcell Energy (FCEL) anyone?). But maybe for some of these names, the rising tide is finally creating the backdrop and their time has come.

AMSC is a leading energy technologies company offering an array of solutions based on two proprietary technologies: programmable power electronic converters and high temperature superconductor [HTS] wires. The company's products, services and system-level solutions enable leaner, more efficient and more reliable generation, delivery and use of electric power. AMSC is a leader in alternative energy, offering grid interconnection solutions as well as licensed wind energy designs and electrical systems.

Disclosure: No position but wishing I had bought the darn ENER

 

Comments

[Blue Duck]

I have been building a similar watch list (AMSC has been on it for a few months) and I would like to hear your comments for a start up company that makes flywheels and just ramping up production for their first 2 installations by end of 2008 - Beacon Power - BCON.

Thanks,
Blue Duck

[claddagh8]

The name of this stock is American SUPERconductor, not American SEMIconductor!

[borisb]

the stock has run up to a short term highish-lofty $45.00 tuesday. But in the long run their seems to be potential to buy on the dips. Right now there is a shortage of wind turbines. And AMSC has licenceed 8 heavy manufacturers in Asia to do all the work. AMSC has a razor-razor blade business model. Kaufman made it simple yesterday and said AMSC and partners might be producing 1000 turbines quarterly in 2010. for refernce these type of turbines sell for $2+ million each and AMSC would get 1) licencing fee 2) royalities 3) purchase orders for the core electrical components. Its possible that AMSC and partners may gather up to 10% to 15% marketshare. Right now vestas has 23% marketshare and about a market value of $24 Billion. Meantime AMSC market value is under $2 Billion even though the team is closing in on >10% marketshare. So if stuff unfolds well for AMSC in the coming quarters the breakout has some good potential beyond $45, you just need to play it conservative and use the dips to accumulate.

[resourceman]

Yes indeed ! This has been a Hope company for many years--a stock that requires much patience . Their purchase of WindTec company was well timed and is now paying-off . Made my first stock purchase in late 2003 , and continued buying on dips . Basis ~ $8.80 . Checking the charts you,ll see that AMSC always sells off after a spurt. My advise is put in a lowball offer , good-til-cancelled, and wait. Some morning you,ll be surprised to see that AMSC opened-up below your price and you filled even below your lowball price. Happens all the time. Time to get on this train !!

[Savage58]

Doesn't give me a whole lot of confidence in the research if they can't even get the name right.

[borisb]

AMSC in conjunction with Westinghouse is developing HTS superconductor product to develope 10 mw wind turbines that are 66% lighter. If this is sucessful AMSC will go from selling electrical systems in the 2 mw turbines to selling more valueable superconductors in cutting edge 10 mw turbines. The technology will probably leap frog anything Vestas, Gamesa, Enercon have.

[borisb]

Well its been 8 trading days since the big contract. It makes me wonder if booking $490-ish million in new business during the quarter constitutes the equivalent of another earnings beat like the one report for the first quarter 2008 in early May 2008. Also i notice that the stock is holding on to most of the gains since the spike to $45, this would be bullish chart action that suggest the price will go higher still in the coming months. I am not sure if the company needs more contracts or an another earnings beat to exceed $45 or if the contracts annouced ($490 million) already justify more gains. I am gradually leaning towards the later.

[TraderMark]

Hoping to see that gap filled ($37) :) Maybe if crude dumps they will toss out all these sexy "alternative energy" plays - one can hope ;)

Then again ENER has not really made any moves to fill that gap either hah.

[borisb]

the AMSC has sold off for 3 days down to the $37s/$38s and thats a big fat dip that should work for all the long term investors who wants in on the multi-year growth wave.

[turdfurgeson]

Nice insider action. They sure timed it out perfectly. Fair Value - $4.99