Investing

Alternative Energy and Cleantech Picks and Pans for 2013

MEMC Electronic Materials Inc. (NYSE: WFR) makes semiconductor wafers, but it is known best for its solar materials production during the solar boom. That was a different time under different valuations. Sales are expected to fall 13% in 2012 and about 1% in 2013, although normalized earnings are expected to flatten out this year, with improvement in 2013 with a forward value of about 16-times earnings. Shares are at $3.15 and have more than doubled from the 52-week low of $1.44 and could literally almost double before its 52-week high of $5.95 comes into play. MEMC’s SunEdison unit aims to develop and finance solar projects with little to no capital outlays from the customer upfront. This could be a huge win for MEMC. Even though this could rally about 30-fold and still not hit its old peak, its market cap is still about $720 million. Analysts also have a consensus price target of $4.31 and that has come down over time. The problem with endorsing MEMC is that it has been such a painful experience, tenured by earnings warnings and no clear picture. Being extremely selective is very important when it comes to MEMC.

Pacific Ethanol Inc. (NASDAQ: PEIX) was supposed to be the grand winner of the move into ethanol. With Bill Gates having taken a big stake of about 20% or so long ago, how could it have been a bad company? That is what investors have to be wondering now with this stock down at $0.32 and with a 52-week range of $0.27 to $1.69. It is almost hard to believe that the market cap here is a mere $46 million. With corn prices and a drought, ethanol is just not that popular outside of corn farmers. With the reports of added engine erosion continuing to dominate ethanol news, and with a delay on its delisting decision by Nasdaq, we have a hard time wondering how this company can come back in favor. The analyst pool is said to be at a consensus target of $0.96, but we would caution that no real analyst calls appear to have been made here in ages. If you adjust for a 1-for-7 reverse split in mid-2011, the old peak would be north of $200 in today’s share prices. We hold little ambition here other than some predatory buyer looking for assets potentially on the cheap.

Solazyme Inc. (NASDAQ: SZYM) makes oil and biofuels from algae and low-cost plant sugars for sectors such as fuel, chemicals, nutrition and health sciences. The company is still expanding globally and has key deals with Bunge Ltd. (NYSE: BG), Archer Daniels Midland Co. (NYSE: ADM), Dow Chemical Co. (NYSE: DOW) and others. Even though this one came public in mid-2011, its shares have slid until only recently. The stock traded north of $25 at its post-IPO peak. Now the stock is down to about $7.50, against a 52-week range of $6.45 to $16.31, and the market cap is only now about $450 million. Despite an expectation that revenue will almost double to about $86 million in 2013, earnings losses are expected to continue. What is interesting is that analysts have a consensus price target above $16 on this stock. Our assumption going into 2013 is that all of the analysts who have buy ratings will at least bring down their price target expectations ahead.

SunPower Corp. (NASDAQ: SPWR) was a semiacquisition, or so believed some on Wall St. When Total S.A. (NYSE: TOT) took a 60% stake in the company, many investors expected that ultimately SunPower was going to be acquired. The company also had government loan guarantees. The problem is that Total was originally paying over $20.00 per share, but then it agreed to buy even more of the company at $8.80 per share and it now owns about 66% of the company. SunPower’s stock sits close to $5.00 and it has a 52-week range of $3.71 to $9.54. Its entire market value is now just under $600 million, and the consensus price target is only $5.03. We cannot help but wonder whether Total might consider tripling-down after doubling-down.

Suntech Power Holdings Co. Ltd. (NYSE: STP) is now under $1.00 per share and worth a mere $154 million. Shares are around $0.86 and the 52-week range is $0.71 to $4.40. With this being based in China, the risks of duties and tariffs will be present even if the company can manage to mitigate the risks by focusing elsewhere in other markets. The other issue here is all the accounting woes and fraud, which went back to 2010. When we first heard the news, we wondered if Suntech even had a future, and those fears are even more compounded after a NYSE potential delisting notice. Analysts still supposedly have a price target north of $2.00, but we would make the note that this may have not been updated properly. History has taught us that when woes are this big, investors lose far less money by being patient rather than trying to pick any massive bottoms.

Tesla Motors Inc. (NASDAQ: TSLA) is hard to consider a classic alternative energy player, but the company does make and sell high-end electric sports cars and sedans. With a $3.9 billion market cap, this Elon Musk company has even committed to raising its car prices in 2013. Shares are close to $34.50, the 52-week trading range is $22.64 to $39.95, and analysts have a consensus price target of almost $37.00. Morgan Stanley (NYSE: MS) is very optimistic here and even expects that shares could be worth $50 over the next year or so. It almost seems hard to believe that this stock is holding up so well, and we wonder if any potential tax credit changes and a slowing economy will act as a drag on orders ahead when it is expecting to hike prices.

So, here you have seen the good, the bad and the ugly. Consensus price targets and earnings or sales estimates are from Thomson Reuters. The market capitalization rates and price data come from Yahoo! Finance. Again, this is not a list solely of stocks to buy. Some of these alternative energy companies or cleantech companies could have serious challenges ahead in 2013 and beyond.

For those investors seeking to diversify their green or cleantech investing via ETFs or funds, there are the PowerShares WilderHill Clean Energy (NYSEMKT: PBW) and the Guggenheim Solar (NYSEMKT: TAN) products. The latter is solar-focused, and the former includes companies that are more diversified in alternative energy within and from outside of the United States. Then there is also the wind ETF via the First Trust Global Wind Energy (NYSEMKT: FAN), but we would caution that its largest holdings appear to be foreign companies.

JON C. OGG

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