Westport Innovations Inc. (NASDAQ: WPRT) is a stock in a true conundrum. The stock keeps rallying and hitting all-time highs, but it is at valuations which would drive investors nuts just using traditional investment analysis. What is driving the move is the hope of Compressed natural gas engines for 18-wheelers. Just keep in mind that this is a story not really suitable for widows and orphans investing dollars.
Shares have hit yet another all-time high today after signing a supply agreement with Cummins Inc. (NYSE: CMI) to allow manufacturing of the Westport HD 15 litre engine in a Cummins manufacturing facility in Jamestown, New York.
The company is losing money and sales for Fiscal March-2013 are expected to be about $346.9 million per Thomson Reuters data. Westport’s current market value is $2.2 billion with shares up another 2.2% at $45.90 and a new high today of $47.38. The prior 52-week range was $16.19 to $45.85.
The efforts of T. Boone Pickens are part of the valuation premium here. Many would argue that traditional analysis does not add up here, while others would argue that it is the growth opportunity on CNG trucks that offers the company billions in potential upside. Mr. Pickens hopes that his Clean Energy Fuels Corp. (NASDAQ: CLNE) will pay off as the CNG gas stations around America if CNG trucks become an everyday thing in trucking.
Morgan Stanley started Westport with an Overweight rating just last week, but the stock is now trading well above most analyst price targets because it has run and run on news. Thomson Reuters has a consensus price target of only about $34.00.
Short sellers have been upping their bets against this one: the end of January was 5.559 million shares in the short interest, the highest share count short in a year. How can this one rise? Technically, as much as it wants. As far as the real value, this may be a guessing game.
This stock is a news-driven and momentum-driven stock, and the verdict right now is that the news flow will remain favorable.
JON C. OGG
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