Cowen’s Stone Remains Downbeat on Energy Conversion Devices (Nasdaq:ENER)

Sep 01, 2010
Author: SCP Editor

September 1, 2010 – Analyst Comments – Cowen’s Rob Stone maintained a NEUTRAL rating this morning on Energy Conversion Devices (Nasdaq:ENER), which is currently trading around 0.6x book, citing execution and dilution risk.

Financial Results:

Energy Conversion Devices reported Q410 revenues of $86.1 million, compared to $51.4 million for the same period last year, with gross margins of 3.4% and 15.2% respectively. Q410 net loss was $20.2 million, or $0.48 per share, compared to a net loss of $17.5 million for the same period last year.

For the FY10, it reported revenues of $254.4 million, compared to $316.2 million for FY09, with gross margins of 3.3% and 31.1%, respectively. Net loss for FY10 was $455.8 million, or $10.72 per share (note this includes a non-cash impairment charges of $359.2 million), compared to a net profit of $8.5 million for FY09.

In terms of guidance, management expects Q111 shipments of about 28MW to 33MW, production of about 33MW, and consolidated revenue of $63 to $68 million on gross margins of 15% to 18%. For the FY11, it expects shipments of 120MW to 140MW, production of 120MW to 140MW, and consolidated revenues of $280 to $330 million on gross margins of 15% to 18%.

Key Takeaways:

·         The Q4 revenue upside was primarily in the systems business so really didn’t help out profit much;

·         Conversion of production lines into two new technologies implies execution risk;

·         Company may need additional capital to buttress against ASP erosion;

·         FY11 guidance implies that project pipeline won’t have much of an impact on systems sales, and projects will likely also be completed by channel partners;

·         Convertible notes maturing in June 2013 also represent an overhang.