LDK & More Solar Peer Pressure (LDK, FSLR, CSIQ, JASO, ESLR, SOLF)
LDK Solar Co., Ltd. (NYSE: LDK) is living up to the doubts that many investors had in this stock. When times were good for solar and alternative energy players, many questioned the Chinese company. Now times are tough, and the news looks tough inside the doors at LDK. Unfortunately, this is something solar investors have had to brace for now that the economy is softening and now that low energy prices are making many alternative energy projects not economically viable.
The solar wafer maker lowered its Q4 revenue expectations by some 23%as its customers have delayed shipments. The company also cut itsgross profit margin expectations and its 2009 salesprojections. The blame here is on the recession and tight creditmarkets, but the company also had delays in boosting production at oneof its polysilicon plants. Another plant is expected to beginproduction in the second quarter. Yet another disappointmentfor its Q4 may resolve around the change of timing of its earningsannouncement from late-February to early-March.
The new revenue guidance between $425 million to $435 million, down from a prior range of $555 million to $565 million.
It now sees wafer shipments of 245 to 255 megawatts and gross margins of 10% to 13%, down from prior respective ranges of 260to 270 megawatts and 18% to 21% margins.
Revenue this year is now expected to be $2.3 billion to $2.5 billion down from aprior range of $2.9 billion to $3.1 billion. We would note that LDK expects a back-end recovery because it is projecting 22% to 27% gross margins.
The fall-out is hitting most other solar stocks, although not as muchas the news is hitting LDK itself. Shares of First Solar Inc. (NASDAQ:FSLR) are down 0.6% pre-market at $156.85. Canadian Solar Inc.(NASDAQ: CSIQ) is down almost 2% at $6.91. JA Solar Holdings Co.(NASDAQ: JASO) shares are down almost 3% at $4.95. Evergreen SolarInc. (NASDAQ: ESLR) is down only about 1% at $3.55. Solarfun PowerHoldings (NASDAQ: SOLF) is down almost 3% at $5.95.
Despite this LDK news being yet another disappointment, there are manywho may believe that the valuations are becoming fair at LDK with a newmarket cap of under $1.6 billion after this mornings near-$2.00 drop.It listed a cash position of more than $380 million and unused creditfacilities in excess of $850 million. Shares are back down around$13.00 and its 52-week trading range is $9.45 to $52.40.
Jon C. Ogg
January 6, 2009