Jefferies Cuts Suntech (STP) Target 20% to $2; Sees Write-Offs, Consolidation as Key Downside Factors
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Up: 8 | Down: 5 | New: 26
Rating Summary:
1 Buy, 8 Hold, 12 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Jefferies slashed its price target on Suntech Power (NYSE: STP) by 20 percent, from $2.50 to $2.00, following third-quarter numbers and outlook. The firm maintains an Underperform rating on the stock.
Tuesday morning, Suntech reported a third-quarter loss of 19 cents per share with revenue of $830.7 million, versus consensus views calling for a loss of 26 cents and revs of $766.1 million. Looking ahead, however, Suntech sees fourth-quarter shipments down 20 percent sequentially, and expects gross margin of 9 to 11 percent. Suntech also cut fiscal 2011 shipment expectations from 2.2-GW to at least 2.0-GW, and revs moved from a range of $3.2 to $3.4 billion down to $3.0 to $3.1 billion.
On the numbers, Jefferies commented, "We believe further downside exists to Suntech, especially given the pending write offs, higher interest expense, and commentary from competitors that Suntech banks are seeking consolidation. Suntech is in an envious market position given its brand reputation, but remains financially challenged in a rising interest rate environment."
Further, Jefferies highlights 6 catalysts for its de-risking analysis: "1) improvement in macro sentiment and credit availability resulting in demand elasticity, 2) inventory/PPE write-downs, 3) a lower Euro, 4) silicon price declines allowing further panel price reductions, 5) capacity rationalization and consolidation by attrition, 6) removal of government subsidy cut overhang. Only the silicon price declines have fully materialized (STP expects a bottom next quarter), and capacity rationalization have only just begun."
Jefferies is also modeling for a write-down of about $500 million on $1 billion of goodwill, intangible assets, investments, and other long lived assets.
For an analyst ratings summary and ratings history on Suntech Power click here. For more ratings news on Suntech Power click here.
Shares of Suntech Power closed at $2.62 yesterday.
Tuesday morning, Suntech reported a third-quarter loss of 19 cents per share with revenue of $830.7 million, versus consensus views calling for a loss of 26 cents and revs of $766.1 million. Looking ahead, however, Suntech sees fourth-quarter shipments down 20 percent sequentially, and expects gross margin of 9 to 11 percent. Suntech also cut fiscal 2011 shipment expectations from 2.2-GW to at least 2.0-GW, and revs moved from a range of $3.2 to $3.4 billion down to $3.0 to $3.1 billion.
On the numbers, Jefferies commented, "We believe further downside exists to Suntech, especially given the pending write offs, higher interest expense, and commentary from competitors that Suntech banks are seeking consolidation. Suntech is in an envious market position given its brand reputation, but remains financially challenged in a rising interest rate environment."
Further, Jefferies highlights 6 catalysts for its de-risking analysis: "1) improvement in macro sentiment and credit availability resulting in demand elasticity, 2) inventory/PPE write-downs, 3) a lower Euro, 4) silicon price declines allowing further panel price reductions, 5) capacity rationalization and consolidation by attrition, 6) removal of government subsidy cut overhang. Only the silicon price declines have fully materialized (STP expects a bottom next quarter), and capacity rationalization have only just begun."
Jefferies is also modeling for a write-down of about $500 million on $1 billion of goodwill, intangible assets, investments, and other long lived assets.
For an analyst ratings summary and ratings history on Suntech Power click here. For more ratings news on Suntech Power click here.
Shares of Suntech Power closed at $2.62 yesterday.
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