Hoku Scientific, Short Interest Rises Into Earnings (HOKU)

Shares of Hoku Scientific (NASDAQ:HOKU) are gapping down over 10% this morning.  The company posted results after yesterday’s close, although as we noted this one wasn’t really about the earnings.  Revenues came in at $1.1 million and EPS was listed as -$0.04, and the few analysts that follow it according to First Call were expecting a consensus of -$0.06 and $1.1 million.  Here was an outlook piece last month that sort of gave a ‘both sides of the story’ outline for the company.

Hoku Scientific has seen a downgrade this morning, with Piper Jaffray trimming its rating to Underperform from Outperform and maintaining an $8.00 target.  If you review the NASDAQ short interest, this one saw a significant jump in the July short interest after its shares rocketed.   The July short interest was listed as 3.116 million shares, up from only 847,000 in June.

The company also addressed its facility progress.  It expects the cost will be greater than $260 million originally projected, but it has not yet determined an estimated cost.  Hoku will also use over $211 million in advance payments from polysilicon agreements to contribute to the financing of the construction, subject to its achievement of various milestones. It is targeting 2009 for production dates.  The company also plans to cover the remaining construction costs through debt or the issuance of equity securities.  In other words, watch for a stock or convertible debt offering.

Hoku did discuss its current and forward revenues.  Its pact with the Navy is ending in August and its only source of revenue for the near-term will be solar module sales.  The new guidance of revenues for its fiscal year ending March 31, 2008 is a new range of $3.0 to $6.0 million, down from a guidance of $7.0 to $10.0 million.  This lower revenue target could be a hang up for investors looking for results in hand, although we have noted that the current numbers are a mere speed-bump and speculative investors are looking at this essentially as a call option on solar energy to 2009 and beyond.

Jon C. Ogg
July 25, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.