Check out this link for another analysts perspective. Claims that SunPower is a drag on Cypress!
"Well he may have, but for delivery. What's Warren gonna do with over a billion in silver bullion?"
Well he didn't explain. But what happened right after the purcahse was revealed is a good leason. At that time Silver kept dropping like a stone, way down to $3+; and shorts got crazy, short, short, and short more ("on papaer"). Then they disclosed Buffett's purchase, and that's for Delivery. Suddenly, the market found there's NO Silver available, and Shorts can't cover any way, since no one had real Silver to borrow. Silver shot up to $6 almost overnight. Coincidentally, Gold also started run up off its 20 year bear market.
See, that's what Warren gonna do with over a billion in silver bullion.
Evantually he made at least $7+ Bil. in Silver bullions.
(People believe Gold also heavily shorted in 1980 to 2001; that's another long story.)
Well he may have, but for delivery. What's Warren gonna do with over a billion in silver bullion?
I know he bought a pipeline about the same time framer maybe a little more recently than that, MidAmerica or Midwest something so that is sort of a commodity play.
Yes, he said he was bearish on the dollar too.
Buffet got into commodities way before the mass aware of it. He bought about 1 Bil. ounce Silver ("poors gold") 5 years ago, not paper, but Silver Bars for delivery.
He also bought 2 small oil/energy companies, and took 20% stake of a China petro company last year. (according to my memory)
So yes he doesn't need to "chasing the runup in commodiities," because he was there.
(In summarym he is shorting $US.)
I didn't plan to share this CC. I just don't like to share with some egotistic
For this CC, I have to say the very important part being the last part of conclusion. Also it is important to keep in mind - SPWR management is a very keen team, but also with great salesmanship. Investors have to be cautious in taking in their optimism. I have to also admit some value getting difficult to assess even I am reading from transcript instead of listening to "recorded voice".
SPWR 4/20 CC
1) 3RD line began to produce, shipping minimum 20% conversion rate. By year-end minimm 22%.
2) Less than 7 gram/watt will be at our line 4, which toward the end of year. Line 4 is planned to enter production by the end of year. Line 1-3 will be retrofitted to 7 gram/watt in first-half of 2007.
3) Construction of gen. 2 fab. line is to start this quarter. Incremental 200 MW capacity and will add first two lines in 2007.
4) Start construction of new panel plant with capacity of 30MW, near by our cell plant, total planned 90 MW, will begin production by 3rd Quarter and ramp up in Q4. This facility will have advanced automated production (currently SPWR ordered solar panels through 2 Chinese solar makers). This auto line technology is borrowed from Cypress?s back-end chip-package auto line. The decision to manufacture panel in-house instead of outsourcing to China will be dilutive at first 2 quarters, neutral for Q3-4, accretive in 2007. In the long-term, we expect to pull 10-20% of panel-making cost out.
5) Q2 $50-52 millions, 5-7 cents/share, expect full-year production of $220 mils.
6) We help our Ingots supplier to locate poly. So we are quite sure that our ingots supplier will have enough poly to complete the production.
I too am grateful for the great discussion. I even appreciate the occasional sparring.
I agree with your sentiments on Buffet. He has stayed out of techs for all his investing career with the exception of LVLT and I haven't heard about him chasing the runup in commodiities either which I'd figured he would have seen and exploited. Seems to me he missed some excellent opportunities in tech plays and commodities plays in his long and illustrious career.
With respect to the decrease of 9 to 7 grams per watt I'm concerned. In the last 3 calls of the SPWR conference it was asked if there would actually be a cost savings accrual associated with this and they didn't seem to answer directly. I'll have to listen again, but I was thinking that perhaps while they gain in conversion efficiency the yields decrease accordingly or the is a corresponding waste of material so that there is no net gain in the process but that they eventually hope to reap gains. Like I said I'll listen to the call again.
One thing in our favor is if energy prices continue to surge. April is usually a declining cost month but natural gas spiked over $1 (18%) last week, crude oil is up $15 (25%) since the end of December reaching an all-time high friday, and heating oil is also up 25% since the middle of February and that is after the warmest winter in a 100 years. As people become more and more frustrated with the cost of energy the media will start hyping alternatives, alternatives with become increasingly cheaper in comparison to fossil fuels and there will be a run on SPWR type stocks. What if oil does hit $110 a bbl. It wouldn't surprise me to see SPWR at $70 or even $80 particularly if analyst start talking about '08, '09 revenues. Energy cost will literally be the talk of the town, every town in the world. We could see a real mania and I forget to mention the massive short interest in SPWR and CY. In this best case senario TJ could sell out a smaller portion of SPWR shares to pay debt and strenghten the balance sheet.
I really should finish reading before I post. I keep on correcting myself when I read more -
In this conference call, it is indicated that 7 gm/watt will be available on line 4, line 4 won't be ready till the end of the 2006. 7 gm/Watt will be retrofitted to line 1-3. So, gross margin of 25-26% in Q4 seems not to have fully reflected an improved polysilicon consumption from 9 gm/watt to 7 gm/watt. Therefore, there might be rooms to improve in gross margin in 07 when Line 1 through 4 fully upgraded to 7 gm/watt function if ploy price remains stable.
I am no longer so sure whether calling SPWR's valuation unstainable correct. Gross margin 18% Q1, 20% Q2, 22-23% q3, 25-26% q4. This margin improvement is mainly contributed by great gram/watt improvement from 9.2 down to 7. They will retrofit back line 1 and 2 to this generation 2 technology. By 2007, 30 MW line put into production, it will further improve manufacturing efficiency.
So, SPWR has the highest energy conversion efficiency 22% with one of the best gram/watt saving. I believe it stand out in the long run. Although mono-crystalline does draw higher poly cost, the normalized gross margin 25-26% does seem equal to industrial average. So we should expect SPWR reaching a 27% gross margin and 17% operating margin in 2007. With around $310 mils revenue in 2007 and $530 millions in 2008 and 17% operating margin, this stock is expensive but expensive for good reason. Furthermore, poly cost right now stood at 50% of COGS, imagine if POLY constraint is relieved later 2008, could operating margin surge beyond 20% or much greater?
Any solar companies can ramp up production lines in half-year span. The question is whether their product is in demand for the long run.
I read this article and laughed. They talk about strong cyclical demand for CY's core products, but subtracting SPWR's revenues from this quarter and the December quarter and you find that all of CY's top line growth and then some was accounted for by growth at SPWR. CY's core revenues fell by $1M. It's right there in black and white. While the analyst complains about SPWR's low gross margins, the fact is that SPWR's gross margin may be 17% or so, but their total op ex is also 17%. CY's op ex (minus SPWR) is almost 50%. SPWR has a clear plan to increase margins to 25-26% and have committed to keeping op ex at around 17% so they are on a clear path to profitability. CY has no plans to bring down op ex (quite the opposite, it has increased in the last quarter both in real terms and as a % of sales) and in the mean time, gross margins aren't expected to grow significantly.