Iam Phree

LDK Solar: Is the Sell-Side Analysis Valid?

Most point their fingers at the analysts negative sentiment and conclude that they were correct based on stocks performance. But if you read deeper, the only reason the analysts got it correct is that the market crashed. Not one of these analysts cited an impending market crash for the reason to justify their downgrades. So what am I getting at? They were lucky! And luck doesn't fly! To a large degree, we conclude that the analysts actually got it wrong based on their reasoning processes and right based on unforeseen external circumstances. If their reasoning process has failed, what credibility do they retain?

We also have to look at the possibility that the firms they work for may have a vested interest. Could it be that the analysts are in a position where a conflict of interest may be at play? I think this is what you are getting at. "Want a job, then do as I say or imply." mode of operation.

Continued negativity without a down market to hide behind will not work for long. So the bets are on of virtually all investments, when will the market turn? Hard to say, but Obama is pro-alternate energy. At least for solar, I believe the worst is over. Solar may in fact lead in the market recovery.

While all this played out, LDK has actually accelerated plant wafer operations to facilitate an overbooked manufacturing capacity in 2009. What does this tell you? It tells you they have a booming business and with polysilicon manufacturing about to turn on, their margins will improve significantly. 2008Q4 time frame offers a rare opportunity for a LDK investment.

We are dealing with billions in revenue and margin improvements of 50%. I'm not recommending waiting for the analysts to figure it out.

Solar Stocks Are Now Attractive Again

With all due respect, I think you were correct that LDK Solar would drop earlier by shear luck. If you recall, the market tanked! I see no math projections here so I will offer some.

LDK Solar provided preliminary guidance for 2009 of 2.9 BILLION revenue. Link: www.clusterstock.com/2... LDK is also completing their own polysilicon plant expansion, which will reduce costs associated with buying polysilicon, in effect, increasing margins. Let's presume margins are 30% due to self-sourcing polysilicon. 2009 EPS est = 2900 x .3 / 111.28 = $7.82!!! At a prediction of $33.00, you are stating in 2009, LDK will have a PE of 4.22! I think your projection may be off by at least a factor of 1/2 even in this market environment! They have also published preliminary revenue numbers for Q3. It appears Q3, will blow away analysts expectations as so many other quarters before. Your one year price target may just be hit in a month. With all due respect, may I suggest a little deeper digging.

Still, I like your bullish sentiment. It is good to have you aboard.