A Second Try for Evergreen Solar

One week after writing that I am short-term bearish and long-term bullish on many of the stocks in the solar sector, Evergreen Solar (ESLR) responds to my direct critique with another blockbuster announcement. On June 18th, ESLR announced that it had secured another $600M in contracts bringing its backlog up to $1.7B. This announcement was well-coordinated with an analyst day on the following day. And this time, it seems the market is ready to believe.

ESLR popped as much as 12% in the after-hours. After fading a bit from those levels, ESLR made a strong close, finishing with an impressive 20% gain. As I noted in my last missive, the May 22nd announcement of $1B in new contracts was met with a strong fade and indicated market skepticism. Thursday's strong technical behavior indicates the market has come around; perhaps the second try for Evergreen Solar will be the charm. I cannot argue with the market on this one, and I am now fully bullish on ESLR.

The chart below shows that ESLR has conquered the double-resistance at $12 that I proposed as ESLR's first proving point. However, given the over-bought stochastics, price stretched well above the upper Bollinger Band, and next overhead resistance at $13, I would prefer to buy ESLR on a pullback. Another fade would invalidate the bullish signal and raise even more alarm than the last fade did.
 

Be careful out there...!

Full disclosure: No positions in ESLR at the time of writing.

Comments

[rana]

looks like a very good buy on the technicals. was able to stay above the breakout at the close. the slim jim pattern suggests a move to at least 16 in the next 60-90 days

[petyaczar]

IMO

Assuming this is shippable backlog, that ESLR can turn into revenues - and I believe it is - I am looking for ESLR in the mid-high 20's by end of the year as higher margins and revenues translate into apidly growing profits.

ESLR has been a laggard, and this should reflect its "catch up" to valuations in the remainder of the solar space.

Been long since 8's staying long, and adding to my position on pullbacks.

IMO

[CliffA42]

16 looks reasonable in the near future, and yes, it is catch-up. In analysis of the whole sector, the important thing is to sort out the material suppliers from the panel makers/installers from the verticals. When you look at the material suppliers, make sure they do something else for a living, too, which makes WFR look promising. When you look at the panel makers/installers, make sure they have the size and market position in key countries, which makes STP look promising. And on the verticals, TSL. The others will run with the momentum players.

[Ernie Montague]

As with most technical "analysis" yes, it looks good unless things get bad, in which case it looks bad, but it will probably go up unless it goes down.

[User 128948]

You, Ernie, are missing your calling... unless you are already on MSNBC.. in that case you haven't... unless you are not on MSNBC... then you have..

[rana]

technical analysis is just another name for probability play. for each chart we can calculate a formula, but it's much easier done with visual aids like charts than with formulas.
so basically ernie is right. when we enter a technical play we have a given probability for it to fail and to reach a certain price target.
i for one haven't seen a system that never failed, but i'll be very thankful if someone here can show me this system :)

[samb]

Hope to see Evergreen hit $20 to $30 by the end of the year, First solor is a bigger company but they made huge profit for investors last year. They went from $26 per share to $290.

[RobDC]

Technical analysis can provide invaluable insight into human nature, the psychology of optimism and pessimism, and the impact of fear and greed on a stock price. A stock chart can show you a stock's past behavior when they beat earnings expectations, or a stock's likelihood to weather stormy macro-economic times. Without being able to read a stock's chart you are going into the game without a very valuable skill.

Common patterns have been identified. If someone knows that there is a better than 50/50 chance that a stock will rise dramatically after a "cup-and-handle&q... breakout on above-average volume when the general market is performing well, then that person is a fool for not utilizing that knowledge to better inform his decision-making process about exactly when, and at what price, to buy or sell.

Some investment strategies don't really need technical analysis, but for short and mid-term investments capable technical analysis can be the difference between a gain and a loss - no matter what "the fundamentals" might be saying about the company.

Looking at ESLR's chart we can pinpoint past earnings reports (which have been followed with big price shifts). We can observe that very heavy volume and a sharp rise followed the most recent announcement about contracts. We can see that ESLR was about 18$ within the past year - and with less rosy prospects. You can then surmise that since business has improved for ESLR, and contracts have been signed that will bring in revenue, that ESLR could very easily challenge those former highs around $18 if the good news continues. Technical support (a triple-bottom of sorts) at $8-9 shows that downside is apparently limited to 20% while upside could easily be 100% by year's end if ESLR keeps delivering, if the market steadies, and if the US presidential race features campaign promises for the support of alternative energy (which is likely).

Other than future dilution there is little in the way of bad news - and the dilution factor is already baked in by now. There is plenty of potential good news, though, including legislation from D.C., next month's earnings, more contracts, and the upgrades and revisions that will take into account these new long-term contracts. There is an IPO. There is ESLR's "greener" and more efficient technology. And a nice chart.

[10Q Detective]

Because of the potential for ramping up its production and dramatic cost reduction, however, sun watchers should not routinely dismiss Evergreen Solar as just another player in the future of solar.

industry.bnet.com/ener.../

[dicki31785]

You guys are crazy...no offense but ESLR hasn't accomplished anything yet...they have a nice technology...but it is not even proven they can produce their quad technology on a bigger scale without problems....last Q they broke even due to scrap silicon sales with revenues of a whole 22 million dollars of revenues...WOW it must be worth a 1.4 billion;)....You guys should read what happened to Conergy(German based solar firm)....

Furthermore they are building their facilities in the US which puts them at a labor cost disadvantage to the Chinese solars and to most American solars because SPWR produces mostly in Malaysia...and FSLR is certainly not building their new production lines in the US...Im not saying it cant reach 16 but certainly not a good buy with all their uncertainties...and as Jack Yetiv pointed out their cost advantage (due to lower usage of poly per panel) will erode when poly prices come down which is going to happen just about the time Devens is finished...Also companies are already learning on the job as you can see by the gram usage per panel...while ESLR is just beginning to produce

And the CEO Feldt...Well let's just say I am not a big fan of him...if you guys want a company with a comparable market cap with much more potential than look at CSIQ...If you guys want to bank on technical analysis with solars have fun but it doesn't count for anything concerning solars....Well all in all ESLR is nice for momentum runs....but if the DOW and NASDAQ get crushed next week don't bank on ESLR holding the 10...Kind regards from Germany CW

Long ABX, CSIQ, NFLX, STP, TSL