Alternative Energy Trade Option: Energy Conversion Devices Inc. (ENER) Review
  • Renewable Energy Trade Option: Energy Conversion Devices Review
  • Stock Alert for Energy Conversion Devices Inc. (ENER)
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    Top Energy Stock; ENER Rallies on alarming Solar Incentives Policies

    Shares of Energy Conversion Devices Inc. (Nasdaq: ENER) began rebounding from yesterday’s 6.6% plunge that took the stock to a record low of $3.63, inching up 1% to $3.70 this morning. Yesterday’s plunge folowed increasing concerns that the subsidies to boost the solar panel installations in the European Union countries might be frozen.  The company previously reported that the majority of its revenue growth in 2009 and 2010 came from Western Europe on the back of solid solar panel installation incentives.

    While the majority of solar companies rebounded this year, following the political turmoil in Libya and the Middle East that propelled triple-digit oil prices, ENER shares lost approximately 52% over the last year, including 20% since the beginning of 2011, on declining revenues, negative earnings and sluggish cash flows. Moreover, the declining photovoltaic panel prices postponed the company’s plans to swing back to profitability.

    ENER is a provider of thin-film flexible solar laminate products and systems for the building  of integrated, commercial and residential rooftop markets. The company is on track to begin production this summer of its new PowerBond product with next-generation High Frequency technology and 10% conversion efficiency. At full production, ENER expects to manufacture this technology at a cost of approximately $1.15 per watt. However, the company’s Nano-Crystalline technology was recently verified by the National Renewable Energy Laboratory (NREL) with a conversion efficiency of 12%, a world record for thin-film silicon. ENER is targeting 14%-15% conversion efficiency at a production cost of $0.65 per watt by 2015.

    The consolidated revenue for Q2 FY 2011, ended December 31, 2010, was $69.5 million, an increase of 31% over the Q2 2010, and an increase of 2% over Q1 FY 2011. However, the company missed the analyst expectations, which called for revenue of $73.7 million for Q2 FY 2011. During the quarter, ENER shipped 28 MW of PV products and produced 32.5 MW compared to 19.7 MW for the same period one year ago.

    The company reported a net loss of $7.6 million, or $0.16 per share. This compares to a net loss of $39.3 million, or $0.93 per share, in the second fiscal quarter of 2010, and a net loss of $13.5 million, or $0.29 per share, in the prior quarter. Analysts had expected a loss of $0.27 cents a share. The net loss narrowed on stronger gross margin, which hit 21% in Q2 FY 2011 up from 18% in Q1 FY2011; and lower operating expenditures.

    ENER has also reported that it expects consolidated revenue to be in the range of $55 million-$65 million for the third quarter of 2011, consolidated revenue of $115 million-$130 million for the fourth quarter of 2011 and consolidated revenue of $310 million-$335 million for fiscal 2011. According to Reuters Estimates, analysts are expecting the company to report revenue of $80 million for the third quarter of 2011; revenue of $85 million for the fourth quarter of 2011; and revenue of $305 million for fiscal 2011.

    As of December 31, 2010, ENER had $182.6 million of cash, cash-equivalents and short-term investments. The long-term debt balance stood at $233 million, which limited its ability to expand the production capacity and tap the growth in the global PV installations. According to Ardour Capital, the global PV market could surge 22% in 2011 to 17 GW and further expand to 20.3 GW in 2012.  The North America market is expected to nearly triple over the next two years. The U.S. market alone is forecasted to increase from 1.44 GW in 2010 to 4.68 GW in 2012, providing significant expansion opportunities to ENER.

    The technology leadership, improved cost structure, and rebounding demand for PV panels due to skyrocketing oil prices position well ENER to make its way back toward profitability. However, the declining solar panel prices, and significant competitive pressure from Chinese low-cost manufacturers could further take a toll on ENER valuation.

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