UPDATE: Northland Capital Markets Upgrades Maxwell Technologies (MXWL) to Outperform

(Updated - June 17, 2015 9:21 AM EDT) (Article was updated June 18 with changes to the first paragraph.)

Northland Capital Markets upgraded Maxwell Technologies (NASDAQ: MXWL) from Market Perform to Outperform with a price target of $7.00. The change follows meeting with management. Analyst Noah Kaye expects short-term balance sheet issues will be remedied without new equity, and he believes the company has possible catalysts in auto and trucking in the next few quarters. He also said he remains conservative on China visibility and noted valuation remains below historical norms.

"Last week MXWL completed the sale of $10M of common stock through its at-the-market offering, selling 1.83M shares. We expect MXWL will secure a new debt facility that well exceeds our projected ~$5M cash burn from operations for the remainder of 2015. The $10M equity raise should allow MXWL to pay off the current revolver with Wells Fargo in case a new line of credit cannot be established before the July 15th deadline. Failing other options, as a stopgap we believe MXWL could repatriate some of its $17M in cash currently held in Switzerland at a relatively modest 5% penalty. Thus we believe it unlikely that MXWL will need to raise additional equity," said Kaye.

"We see potential catalysts over the next several months in auto and trucking that could lift shares as MXWL works to diversify its revenue base away from China hybrid buses," continued the analyst. "In trucking, we expect initial indications of Engine Start Module (ESM) order volumes from Kenworth by the time of MXWL’s 2Q15 earnings call ... In auto, we believe MXWL remains on track for the launch of non-PSA automotive programs with modest initial volumes potentially as early as 3Q."

On China, Kaye said, "Management indicated that 2Q bus demand was tracking to expectations and that the forecast from China bus customers continues to point to a ramp While we remain conservative on this vertical with estimates of $36M in FY15 revs (a 32% decline Y-o-Y), industry unit growth and impending policy changes appear to be supportive of growth in 2H15. Based on data from China’s Ministry of Industry and Information Technology (MIIT), we estimate that the production of plug-in hybrid commercial vehicles increased 56% in April and May, after an increase of 61% in 1Q15. We note that MXWL’s bus related revenue declined by (53%) Y-o-Y in 1Q15. In part, we can attribute the drop-off to several factors including (1) ASP declines of 30%+ (2) lower ultracap content per bus and (3) some plug-in hybrid medium-duty bus switching to all-battery content. However, we also believe that 1Q may have seen some customer inventory workdown, as we saw in 3Q14. With scheduled cuts of 10% to subsidies at the end of the year, we believe that bus OEMs will look to ramp production in 2H."

For an analyst ratings summary and ratings history on Maxwell Technologies click here. For more ratings news on Maxwell Technologies click here.

Shares of Maxwell Technologies closed at $6.04 yesterday.

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