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American Superconductor Is A House Of Cards Set To Blow Over By A Gust Of Wind - $7 Price Target

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White Diamond Research


  • American Superconductor stock has risen over 100% since July 2018 on little progress in its businesses. We expect a fade back to $7 or less.
  • The company has had significant losses for the past 19 out of 20 years with its grid and wind businesses, a pattern we foresee continuing for many years to come.
  • Most of AMSC’s rally has come from puffy PRs and hype regarding its resilient electric grid and ship protection services government businesses.
  • We believe both of these businesses, which are in the trial stage, are impractical, and we don’t believe the government will spend a significant amount of funds on them.
  • There has never been a cyber or terrorist attack on an electric grid in the US. Ocean mines have not been an issue since WWII.

American Superconductor (NASDAQ:AMSC) has risen over 100% since it was trading at $5 less than nine months ago in July, 2018. We believe this is an undeserved, overexuberant rally. The rally has mainly come from puffed-up headlines, not from solid revenue increases or projections. As new investors start getting bored of the puffy headlines and notice the company continues to report poor revenues and continual cash burn, we predict the stock will slide down to the $6-7 range within a year. We give AMSC a generous $7 price target.

We Believe American Superconductor’s 100% Rally+ Into Today Was Unjustified And The Stock Will Retrace Back To $7 Or Less

The following is a 1-year chart of AMSC stock price:

Source: Yahoo Finance

As shown in the chart above, AMSC was trading at around $5 in July 2018. We believe there hasn’t been any news or changes in the company’s business that merits a rally of the share price to over $12 today. Since July, 2018, AMSC’s market cap has increased by almost $200 million. We believe the stock will give most of that increase back within a year. AMSC still has the same unprofitable and impractical businesses that it has been trying to promote for years. To the company’s credit, it has made initial progress with its two government business segments, but we don’t believe they will generate much revenue for the company.

American Superconductor’s Sinovel Settlement Gave It An Unsustainable P/E Ratio

At first glance, an uneducated investor might think AMSC is doing better than it is. On financial data websites such as Yahoo Finance, it shows that the company’s PE is 9.92, as shown below:

Source: AMSC Yahoo Finance Page

As shown in the financial statistics above for AMSC, the company has a trailing P/E of 9.92, yet a negative

This article was written by

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Analyst’s Disclosure: I am/we are short AMSC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclaimer: http://whitediamondresearch.com/disclaimer/

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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