NEW YORK (TheStreet) -- MEMC Electronic Materials(WFR_) is up by double-digits on Wednesday after providing investors with a bullish outlook on 2011 -- the company guided revenue for the full year above the Street consensus by a range of $700 million to $1 billion. MEMC's top end for earning per share in 2011 is $1.30, also well above the $1 Street consensus -though the company still has $1 as its low-end EPS target.
MEMC missed earnings again, and its semi wafer business experienced a profit stall, yet MEMC shares are on fire on Wednesday. Why? TheStreet spoke with Paul Leming, analyst at Princeton Tech/Soleil Securities, about MEMC's big rally. Leming, who has been covering MEMC for many years, had an earnings per share estimate of $1.28 for MEMC in 2011 -- coming in closest to the bullish target that the company presented in its Tuesday earning report [several analysts raised EPS estimates to the mid-point of the MEMC range, $1.15 to $1.16, on Wednesday]. Leming thinks that MEMC is a very different animal than most solar stocks, and its recent string of disappointments set the stage for a major relief rally.
TheStreet: MEMC has been a dog, and yet, it trades at a price to earnings ratio that's almost twice many of the Chinese solar stocks. So if it's rallying based on its long history of underperformance, it's not because it has had a compressed multiple compared to the solar universe, is it? Leming: "P/E multiples are a bad way to value solar stocks. When you look at enterprise value/EBITDA, MEMC and SunPower are valued at even lower multiples than the Chinese solar stocks." TheStreet: Does MEMC deserve a different grading metric than the rest of solar? Leming: "Until it puts up a few good quarters in a row, yes, , it's graded differently, and this is almost a relief rally. This stock has horribly lagged the market and been one of worst performing stocks in the solar sector."