Another Analyst Likes Capstone

Yesterday afternoon another analyst joined the bullish Capstone (CPST) club.

American Technology Research reinstated coverage on Capstone Turbine with a Buy and price target of $5. According to an AmTech analyst, "CPST is well-positioned to capitalize on these opportunities given its advantaged technology and differentiating benefits. The firm says as the company increases production, right-sizes its overhead expense, and introduces higher-margin products, they anticipate positive gross margins and EBITDA in FY2010, and positive cash flow by year-end." 

Capstone Turbine Corporation engages in developing, manufacturing, marketing, and servicing microturbine technology solutions.

The green case

CPST is the world's leading producer of low-emission microturbine systems, and was the first to market commercially viable microturbine energy products.

Every installed C1000 CPST microturbine solution is equivalent to removing up to 700 average U.S. passenger vehicles from the road, based on EPA emissions and efficiency data for the average US power plant and average passenger vehicle, or the equivalent of planting 730 acres of pine and fir forest, based on CO2 reduction.

The bullish case

• Huge backlog that increased 458% YoY.
• 40% to 60% growth.
• Institutions/funds bought 26 million shares over the past 6 months at an increase of 60%.
• Six Analysts started coverage of CPST in 2008 with average price target of $4.50.
• CPST said last week C1000 Sales exceed managements expectations. 

CPST was over $4 three months ago, and was a $100 stock a decade ago. Now it looks really cheap at $1.18 based on analyst views. The upside targets are higher in percentage than any other stock I can find. 

I'm a new buyer as I believe CPST is now an amazing bargain.

Disclosure: Long CPST

Comments

[Fam62c:]

The only problem with CPST is they can't make a profit, this has been going on for years and years. If there was a sizeable market for their products and the company had potential they would have been bought years ago by someone like GE, Siemens or United Technologies. With CPST it always looks like they are on the verge of becoming successful but it never happens; they just invest more in R&D which never results in profitability or return for the shareholders.

They look like a good bet now because of high energy prices but if we have a big recession and energy prices fall because of reduced demand CPST will, as usual, go nowhere. This one is just too speculative for me, too many false starts that result in nothing but disappointment. Investing money with this management team is like throwing it down a rathole.

2008 Oct 07 12:21 PM

[mbr:]

@ fam62c

your comments of a simplistic general nature also reveal a total ignorance of this company.

Long CPST

2008 Oct 07 12:57 PM

[clu.invesment:]

fam62c YOU just don't get it or your a short seller, CPST is in the sweet spot with MORE orders in 1 year than its ever had. Do you think all the analysts are wrong ? hardly and with more Institutions buying than ever before.

CPST over $2 before this year is up.

2008 Oct 07 01:25 PM

[Duude:]

fam62c:

You've upset those that had bought into the sizzle. Fact is CPST is a simple pump and dump. Company profits aren't a concern as long as speculators believe others will believe it and the stock is trading low enough in its trading range to be pumped again till it advances another buck or two for a sweet profit for the pumpers.

2008 Oct 07 02:56 PM

[longtermstocks:]

CPST needs better marketing - most people have never heard of them!

2008 Oct 07 05:46 PM

[Fam62c:]

I'm not a short, in fact I've never shorted a stock in my life. I owned some CPST shares for a short time many years ago (way before probably all of you) because I thought it had potential and I've watched it since then. The company is a notorious cash burner; they have been eating investment capital for 20 years. Seriously, how many companies have you seen that have taken this long to make money with a concept and actually survived? Orders don't mean anything, profitability does. You can get all of the orders you want if you price your product below cost......what does the market for the products look like at a price that sustains a decent profit margin?

As far as anylysts are concerned; yes, they are frequently wrong. If they were always correct, or even mostly correct investing would be easy wouldn't it. I can remember a ton of tech/internet/dot com companies (including CPST years ago) that the analysts thought had great potential but crashed and burned badly. All I can say for CPST is that they have survived which is miraculous. It's very tough to determine how a new technology will catch on and, when it does, who will be the big winners. Sometimes the pioneer players are not the ones who survive because larger more powerful companies enter the market once the demand is proven.

Look, take my advice and I'll save you some money because I've been around the block a time or two. I'm not saying that CPST will never make it, maybe they will be a success someday (they do get an A for effort I'll give them that) but I made an investing rule because of CPST and other emerging tech companies like them and it's served me well: don't buy the stock until they have proven their ability to generate profits......period with NO exceptions.

Everybody wants to get in the "ground floor" with these companies before they make money. If the technology is legitimate and has a profitable market there will still be plenty of upside if you buy AFTER they start making money. Look at any successful tech startup (and CPST is still a startup after 20 years) and this rule applies; the people who invested after the profits came still did very, very well. In this way you can still make a lot of money if the business works but you will greatly reduce your potential for loss if they crater. Most speculative gambles in the market don't pay off. CPST has to prove that they can make money before they get my investment. I watch CPST and I have for years just in case the enterprise works but I'm not buying until I KNOW it's going to work. CPST is still in development and they are losing money and burning through cash; that's what I know for sure right now. Don't be a sucker, make them prove to you that the concept can make money before they get YOUR money.

2008 Oct 07 08:20 PM

[clu.invesment:]

fam62c IS wasting alot of time looking at CPST to have no position? I smell a short seller Basher. He is trying very hard to get people to either sell or not invest in CPST.

3months ago CPST was over $4. I'M A BUYER NOW and will ride it up. New orders soon & CPST explodes over $2. buying now is a low risk play and huge reward gain.

World orders getting built= $$$$$$$

2008 Oct 07 08:57 PM

[Fam62c:]

You are exatly correct, I AM trying to get people to not invest in CPST or any other company until they attain profitability so investors don't get burned as many have in the past with CPST. I've learned a lot in the time I've been an investor and I thought I would pass on a little wisdom so other people don't have to make the mistakes that I've made. I provided a simple rule that has worked for me. Note that I didn't say not to buy CPST I just said wait until they are making money; what's wrong with that? Am I a "basher" because I pointed out that they have yet to produce sustainable profits? That's a fact.

If you want to be a venture capitalist with your money that's fine but I'm not going down that road again with CPST or anyone else. I hope you are right, I want to see companies do well, export products and create jobs. I hope CPST makes it but I'm not rolling the dice with my money until they can prove they are going to make it.

By the way, if I were a short seller or "basher" of CPST for nefarious purposes do you really think that an anonymous post on this message board would make any difference to the stock price? You've got to be kidding me.

2008 Oct 07 09:29 PM

[frflyer:]

I think there is more potential here than one might think. I find it encouraging that another company in a non competing industry wants to buy their air bearing technology. I also think there is more potential in the transportation sector, like the bus manufacturer that placed a large order for microturbines to use in hybrid buses. Down the road, no pun intended, this could be a big market. One of the major drive train manufacturers for large trucks is building drive trains for hybrid trucks.
Sure that's speculative and I'm not arguing the numbers here, just my two cents.

2008 Oct 08 12:18 PM

[Stupid Rookie:]

It thought it was cheap at $2.00...I almost peed myself when it dropped to a buck? Go long on Capstone!

2008 Oct 09 11:13 AM

[homerun:]

i respect fam62c's desire to protect investors but lets not ignore the numbers. orders are growing as indicated by the hefty backlogue. the company is now trading at roughly 3x cash. they have 60 million on the balance sheet. institutional ownership is increasing and the green movement plays right into capstones strength. i think its time for fam62c to at least acknowledge that CPST is now a very intriguing speculative play considering this stock is trading at the low end of the 52 week range.

2008 Oct 10 05:23 PM

[Raoul46:]

I like CPST for most of the reasons previously stated but fam62c is correct. He's an investor and the rest of us are gambling.

2008 Oct 26 03:55 PM

[doutwest:]

This clearly a very speculative investment....just look at some of the previous comments and they are right on target. Profitability is key to valuation. This stock probably should be traded as a penny stock until they can produce profit. I have bought some in the past (total gamble just like the crap table) and got lucky by the market exhuberance. Before I try again, there needs to be a whole lot more general market stabilization. I own zero of their stock today and can see their management is scrambling by cutting out layers, that could be a good thing.

I visited and spoke with a few of their key players several months ago and the idea of profitability was not on their highest priorty list, it was primarily sales growth. That, to me, seemed to be a fundamental flaw in any basic business acumen. After 20 years, will they ever wake up?

2008 Dec 02 01:12 PM

[drbob66:]

This stock is now trading at $0.53. I just read their last earnings report (well, no earnings at all, really), and it seems to me that they really do spend a lot of money on "general and administrative expenses." I agree with Fam62c...this seems like a lame company. However, I think I'll buy 100 shares tomorrow and put it in my IRA...maybe they'll figure out how to turn a profit in the next 20 years or so.

Feb 26 08:41 PM