Analyst Notes: Cowen’s Rob Stone Weighs in on Energy Conversion Devices (Nasdaq:ENER)

Nov 07, 2008
Author: SCP Editor

November 7, 2008 – Analyst Notes – This morning Cowen & Company’s Rob Stone noted on Energy Conversion Devices (Nasdaq:ENER) that he expects Q1:09 EPS to meet or beat estimates, and sees 60%+ upside versus the market in 12 months, reiterating his outperform on the stock. Other notes:

·         ENER’s BIPV laminate is a differentiated application
·         ENER has consistently executed vs. conservative guidance
·         The balance of FY09 is covered by fixed price, take-or-pay contracts all in USD

Stone’s conclusion is that he thinks ENER is one of the PV stocks investors should focus on in the current market, offering a unique product, with specialized channel partners that provides a lower installed cost, higher energy yield, better integration with roofing material and higher subsidies. He also expects margin expansion on higher scale and lower material costs and that capacity expansion is fully funded through FY2010.

Other analysts have made the following call on ENER lately:

·         October 30 – Citigroup rated a SELL and price target of $17
·         October 28 – UBS rated a NEUTRAL
·         October 10 – AmTech Research rated a BUY with $59 price target
·         October 7 – Wedbush Morgan rated a BUY with $62 price target
·         September 2 – Janco Partners rated a MARKET PERFORM with $72 price target
·         August 29 – Credit Suisse rated OUTPERFORM with $86 price target

Energy Conversion Devices’ stock closed at $34.60 in yesterday’s session. On a trailing 12-month basis, the stock still looks pretty expensive, at a P/E of 389.09, and a P/S ratio of 6.18 with an EV/Rev of 5.55. We have written recently that our forecasted revenue for ENER in FY09 is $275 million, and we think a 3x forward multiple of sales is reasonable, given the fact that the broader market valuations have been substantially recalibrated to take into account the current recessionary environment. This would yield an implied stock target of $30. Even if we used a lofty 50x forward multiple of earnings (our forecast is $18.8 million) we would get an implied stock target of $20.

We agree with all of the reasons Stone is bullish on ENER, and agree that it is one of the differentiated midstream solar firms to watch, and accumulate on broader market weakness. We would just be looking for a cheaper entry point in the sub-$30 range.

Important Disclosure: SCPEditor does not hold any position in ENER. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance.  


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