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    Alternative Energy Stock Watch; is Power-One Poised to Recover as Solar Opportunity Bounces Back?

    The shares of Power-One Inc. (Nasdaq: PWER) surged 14.9% over the last week, supported by expectations that the Japan crisis as well as the high oil prices environment would boost the demand for solar panels at higher levels than previously expected. Accordingly, the nuclear disaster in Japan has eliminated the previously issued concerns that governments’ subsidy programs for alternative energy could be halted as well as contributed to a decrease in speculations that the solar industry could face a supply glut in 2011. Japan is now expected to heavily rely on alternative energy to restore its energy supply, since the troubled Fukoshima nuclear plant would be shut down.

    Despite the recent recovery, PWER shares lost 18% since the beginning of 2011 and as of March 18 traded at $8.35.  The company tumbled 21% on February 4 after issuing guidance for the first quarter of 2011 that was below  market expectations and supported the rumors that the growth is poised to decelerate. With a 52-week range of $3.49-$13.04, the March 18 trade is in the middle of that range.

    PWER is the world’s second largest designer and manufacturer of photovoltaic (PV) inverters used to convert direct current electricity, which is produced by most alternative energy generation sources into alternative current, which is needed for most applications including connection to the electric grid and powering homes. The company’s renewable energy products enable the industry’s highest yielding conversion of power from both solar arrays and wind farms for use by utilities and homes. The company derives more than 70% of revenue and nearly 100% of operating income from the renewable energy segment. The remaining 30% of revenue is derived from the power segment which designs and manufacturers power conversion devices for computer server, storage, networking, industrial and transportation markets.

    PWER achieved record revenue and net income in 2010, driven by a 139% growth in global solar installations. The company outperformed the industry and analyst expectations in terms of growth reporting net sales of $1.05 billion in 2010, an increase of 143% compared to 2009. With the doubling of gross margins, the company’s net income went from a loss of $(65 million) or a $(0.74) loss per share in 2009 to a profit of $144 million, or $0.96 per diluted share in 2010.

    In Q4 2010, PWER earned $54 million, or $0.35 per share, compared with $5 million, or $0.05 per share, in the year-ago quarter. Excluding items, earnings totaled $0.49 per share in the latest period. Sales were $366 million, up 157% from $142 million a year ago. The quarterly results beat the average estimate of analysts polled by Thomson Reuters, who expected a profit of $0.41 per share, excluding items, on $351.9 million in revenue.

    However, the company issued a guidance for 2011 that implies triple-digit growth is behind, as Q1 2011 revenue is expected to post the first sequential decline over the last two years.  For the Q1 of 2011, PWER forecasts revenue of $260 million to $290 million, indicating 80% growth versus the prior year period. The company anticipates generating revenue between $1.1 billion and $1.3 billion for 2011. Analysts polled by Thomson Reuters had expected $313 million in revenue for Q1 2011 and $1.31 billion for full year 2011.

    With the competition among solar cells manufacturers has just started to heat up, the eventual decline in photovoltaic (PV) pricing could trigger another wave of acceleration in global solar installations. Moreover, countries all over the world are now reevaluating their nuclear power policies in the wake of what’s happening in Japan, which brightens the prospects for wind and solar projects.

    The rapid decline in panel prices coupled with the increased efficiency has already brought solar energy closer to grid parity, suggesting an increased deployment of PV panels, going forward. PWER is well positioned to further benefit from this opportunity, leveraging its leading position, recognition and technology, as every solar or wind project requires inverters to operate.

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