Cowen’s Stone Maintains NEUTRAL Rating on Evergreen Solar (Nasdaq:ESLR)

May 01, 2009
Author: SCP Editor

May 1, 2009 – Analyst Comments – Cowen’s Stone weighed in on Evergreen Solar’s (Nasdaq:ESLR) financial results for the Q1, maintaining a NEUTRAL rating, noting overhang and execution risks.

Financial Results

Revenues for the Q1 were $55.8 million, compared to $44.2 million in the prior quarter and $22.9 million for the same period last year. Gross margin was a paltry 1.2%, compared to 4.6% in the prior quarter and 33.6% for the Q1 last year. The company lost $64.3 million, or $0.40 per share, compared to a loss of $51.1 million in Q4 and $25K for the same period last year. Management expects to have production capacity of about 40MW per quarter at Devens by the end of 2009 and to achieve manufacturing costs of about $2 at that production level.

Stone’s Takeaways

·         Partnering up with Jiawei (a Chinese cell/module maker) should reduce manufacturing costs and capex needs, but Evergreen still needs to raise capital in the next few months

·         Product revenue of $54.4 million (17.4MW,  ASP of $3.13) beat estimates of $39.9 million (14MW, ASP of 2.85) but the GM of -1.3% fell below Stone’s expectations of 4.2%.

·         Q1 fees from Sovello at $1.4 million were down 56% Q/Q

·         Revising 2009/10 estimates to reflect lower expected shipments in 2009 (99MW vs. 105MW) product GM (10.9% vs. 13.7% and reduced expenses. Expect FY09 revenue of $290.8 million and FY10 revenue of $447.3 million. Expect FY09 loss per share of $0.28 and FY10 EPS of $0.11.

·         Look for further dilution – the company’s cash position fell to $56.8M as of April 4 from $100.8M on December 31, 2008.

·         Maintains neutral rating

We ran the numbers, based on Stone’s expectations, and at $2.43, the stock is trading more than 22x FY10 expected earnings, which seems to us to be extremely expensive.