NEW YORK (AP) -- Advanced Energy Industries shares dropped more than 3 percent Tuesday, as an analyst cut the solar energy company's rating due to likely pressure on sales and margins.
THE SPARK: Pacific Crest Securities' Weston Twigg lowered Advanced Energy Industries to "Underperform" from "Sector Perform."
THE ANALYSIS: Twigg said in a client note that the company is probably going to see increased competition from SMA Solar Technology and Power-One for solar-power inverters, which convert solar power into electricity. Along with weaker demand in the U.S., it could mean underperforming sales, lower-than-expected margins or both.
While Advanced Energy concentrated on higher-margin inverter business last year, Twigg said that the opportunities to capture that business will decline as competition heats up. The analyst said companies like SMA and Power-One are also looking to expand in the U.S., which could lead to a drop in prices.
Advanced Energy is looking to enter emerging markets with a low-cost inverter, but Twigg said that it is uncertain how well the company will do. Still, the analyst said that the low-cost inverter could be applied to markets like the U.S., to help maintain margins amid price declines.
SHARE ACTION: Shares of Advanced Energy Industries Inc. fell 67 cents, or 3.5 percent, to $18.56 in afternoon trading. The stock has traded in a 52-week range of $10.80 to $20. Shares are up 39 percent for the year to date.