Evergreen Solar (ESLR) Up 20%, Caveat Emptor

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Evergreen Solar (ESLR) is trading up 20% to $10.86 on news that it signed $1 billion worth of contracts.

The larger of the deals involved is with German-based Ralos Vertriebs GmbH and has a face value of $750 million. But, the terms spread the agreement over five years, ending in 2013. It is not clear what the cost of sales here is. Wall St. may look at this as roughly $150 million per annum with a return which may be modest.

ESLR traded above $18 at Christmas last year.

Solar companies have done well lately because of the alternative energy craze. But, Evergreen Solar has been something of an exception. Its first quarter earnings were very disappointing. Revenues were $18.3 million for the first quarter of 2008, compared to $16.9 million for the fourth quarter of 2007 and $12.6 million in the first quarter of 2007. For a company in a "hot" sector, that growth is modest.

And, the company had an operating loss of $7.5 million, about two-thirds of that for facility start-up and write-off costs. That would tend to speak poorly of management.

Evergreen looks good on the news, but no so strong on its merits.

Douglas A. McIntyre