The 1st Albany Capital presentation (presentation slides included) was a good update of the earnings cc.
Strategic factors haven't changed. To review:
- "incentivized industry"
- rapid growth rate
- raw material shortage
- low-cost producer
That said, I'll focus on the numbers.
- Navigant Market forecast for Megawatt output - to rise from 1B MW to 3.5B MW in 2010 - a 22% growth rate. Down from previous 43% rate due to silicon constraint. (Revenue potential for SPWR between $3.00 and $3.50/W)
- Current payback for purchasers - with incentives - is 9 years. SPWR expect to bring this down to 4.5 years - WITHOUT incentives - within 5 to 10 years.
- Expected install capacity: 110MW by end of 2006; two (of six) additional lines by end of 2007 (total capacity approx 180 MW)
- The fourth line this year and the next two in 2007 will use generation two technology, raising efficiency from 20% to 22%. Will be using generation 3 by the completion of the new fab.
- Have already contracted, and locked in prices (mostly ingots) for 100% of analysts' estimated 2006 needs and 75% for 2007. Suppliers have allocated an additional 30% for 2006 and enough to bring 2007 over mean-estimated need. Cost have gone up 20-25%, but this is reflected in their estimates.
- Cost advantage/W for SPWR is $0.50/W
- Expect $210M in revenue and $25M in non-GAAP net income for 2006.
- In fourth quarter of 2006, expect 27% gross margin and 17% operating margin, almost reaching their "model" or 20% operation margin.
- Werner discussed issue of greater breakage and microcracks for thinner solar cells - and a little of how they're dealing with it. Pointed out, as well, that below a thickness of 100 microns, they become flexible.
Good presentation slides and worth a listen. Since the earnings cc is already gone, I'd have to assume that this presentation will soon disappear, as well. Next presentation is next week, Feb 21.
>>So, do you own SPWR, or still just CY only? Just curious.
Just CY. I'll let you know if I sell any. My first sell point is at $24, unlikely to change, but I've learned not to hold my breath. Unlikely to buy SPWR. I'm overweight in CY so my buy point is somewhere under $10.
Haven't listened to today's cc. I heard an analyst on CNBC this morning touting Evergreen and Sunpower, seemed to be giving the right reasons.
C'mon! I know you draw a fine line between "matter-of-fact statement" and "hype". But I am sure that First Albany CC reinforced your confidence. Say something on a bit exciting tone. Everyone are waiting.
1.2 year hold, average 67% gain.
Put 2/3 into AMD at 40.5 - kept the remaining 1/3. Reward is just too great with AMD with a current EPS at about $2.50/year and growing. Buying no more AMD beyond this. Rarely do I buy up like this as my first purchase was at $10 and then more at $5 and then again at $33 and now $40. Expect $3 EPS this year and possibly $4 EPS in 2007. You do the math on the AMD share price.
Good luck everyone. I do not think I will come back to CY as an investment. I been disappointed too many times. I thought the SPWR catalyst would bring this thing to >$20 as institutions jump on. But for many reasons, it looks like it is not gonna happen. The core business stinks - only PSOC is doing great but your are going to have to wait quite a while for those sales to be meaningful to the overall business. But anyway I am happy with my gain nonetheless.
Good luck everyone!!
Piper Jeffray's view (2/14) after STP report:
1) STP's statement likely to affect margin in 2nd half 2006.
2) Current wafer cost is likely to exceed 60% in solar's module COGS.
3) Only the solar makers with long-term contracts can grow, only the makers with fixed-price supply can maintain margin. (note: according to Simon's summary, SPWR seems to qualify for both, I still question whether it is fixed at current price rather than some price projected out the future inflation? SPWR is new, I have hard time to believe that they have bargaining power.)
4) While some of the wafer cost increased can be passed on to customer as they are willing to pay higher ASP for module shortage. In the 2nd half, the increase cost on wafer will outpace the increase of module ASP. thus margin will come down.
5) Long-term, PJ is looking for company that can provide lowest cost/watt.
I can see the underneath light for SPWR behind this bearish report. comment?
Soleil initiated solar industry with a neutral rating, reasons:
1) stocks are priced for perfection.
2) Shortage on poly will cast negative surprise for solar makers for next 12-18 mos.
3) The float on leading solar makers are very thin.
In general, they still believe in market shares gainers like STP and SPWR.
What I was alluding to is that the analyst covers semis and 1 solar which is SPWR. I find it interesting that he doesn't offer an opinion on CY since it is a semi and the majority holder of SPWR. Seems an analysis of CY would dovetail nicely with his orbit.
Yes, it is correct. The analyst is Paul Leming.
Notice that he is also covering WFR, which is wafer fab. so he has a pretty good picture in wafer shortage.
IMHO, it is not that important whether the anaylst follows solar before. This is a new industry anyway. Piper Jeffray is probably more authoritative, they have some bearish view too after STP's statement of 5-7% increase on ASP and 15%-20% on wafer. I got information not from the link you provided, but from firstcall. I try to maintain honesty in boardroom but I am not so sure I can copy report into here, I try to summarize instead of copying.
I am a copycat, my pessimism is inherited from the report i read. It's lazy sunday afternoon, I still defer in listening First Albany report. I may provide more anlysts' pessimistic view in contrast to Simon's summary. I wish Simon can provide some rebuttal.
Consensus for 2007 Revs is $350m, which looks very low if you believe they'll achieve the planned 110MW run rate by end 2006.
High estimate for 2007 is $450m, which looks achieveable if they meet 2006 plan.
You always come out something one step ahead of the rest, truly an asset to this board.
Well it seems that I under-estimate great management team at SPWR.
>Have already contracted, and locked in prices (mostly ingots) for 100% of analysts' estimated 2006 needs and 75% for 2007
They discussed this subject in various alternatives in ER CC. locked-in prices? in current price? or anticipated price? It is definitely a great achievement to reach 27% gross margin and 17% operating margin.
Can you show me the link to first albany cc?