Intel, IBM, HP Entering Solar Market Validates Solars Long-term Opportunity -Piper Jaffray (LDK, WFR)
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Piper Jaffray issued a research report yesterday considering the impacts of three large-cap companies, Intel (Nasdaq: INTC), IBM (NYSE: IBM) and Hewlett-Packard (NYSE: HPQ), entering the solar market. Each of these tech-oriented companies have recently announced new solar initiatives and the firm believes the developments "validate solar's long term opportunity." Notably, Piper believes Intel, IBM and HP entering the solar market "is not yet a competitive threat to incumbent solar companies."
The firm mentions Intel's new solar initiative, called SpectraWatt, first, which will be funded by investments from Intel Capital, Goldman Sachs' (NYSE: GS) Cogentrix Energy, PCG Clean Energy and Technology Fund and Solon AG. With SpectraWatt being focused on mono and multicrystalline Si based cells, Piper believes that Intel will not likely vertically integrate, providing a potential positive catalyst for wafer makers such as LDK Solar (NYSE: LDK), MEMC Electronics (NYSE: WFR) and ReneSola (NYSE: SOL). However, the firm recently confirmed that neither LDK or MEMC "will benefit from initial Intel wafer orders".
Piper next considers IBM's partnership with Tokyo Ohka Kogyo, which was announced earlier this week. The firm calls the initiative "more at a research and development phase at the moment", but points out that IBM has reported that it has "developed a non vacuum deposition process to manufacture CIGS solar cells with targeted efficiencies of 15% or more." Piper believes this bodes well for solar companies that are involved in thin film solar technology, such as First Solar (Nasdaq: FSLR) and Energy Conversion Devices (Nasdaq: ENER).
As it was relative to the Intel deal, the Piper report highlights the firm's current investment perspective on LDK Solar. Piper has a Sell rating and $28 price target on LDK, which represents a potential decline of 30% from today's most recent trade at $39.55. Piper's price target on LDK is based on 13x the firm's PF EPS of $2.21, compared to LDK's current P/E of about 26x. The firm said risks to its Sell rating on LDK include: 1. polysilicon contracts with reliable sources that have not yet been announced, 2. a reduction in inventory leading to better-than-expected near-term numbers, and 3. the announcement of new contracts.
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Comments
Piper
Piper has been proved wrong on every "fear" they have expressed on LDK - they are clearly on the wrong side of the trade and trying to jawbone LDK down to cover their short position. This is what happens when a second tier firm tries to play games that they are clearly not competent to play.
looks like an upgrade
This looks like an upgrade of LDK since all 3 of the risk factors to the sell rating are a certainty.
Typo
there is a typo in this article reg. LDK: "... from today's most recent trade at $49.55" today's high, (it is now 3:44pm), was only 40.27.
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Piper Jeffery has no repution
zhni on Jun 19, 2008 02:29 PMPiper Jaffray is try to bring down the LDK share price to help his clients to cover, I don't think he is going to succeed.