American Superconductor (AMSC) Higher After $100M Contract and Subsequent Upgrade

After the close, American Superconductor Corporation (Nasdaq: AMSC) announced that it and Beijing-based Sinovel have signed a new contract worth more than $100 million for core electrical components to be utilized in Sinovel's 3 megawatt (MW) wind turbines, known as the SL3000.

AMSC expects to begin shipping sets of core components under the new contract in March 2010 and to complete all shipments by the end of calendar year 2011.

Sinovel is China's largest wind turbine manufacturer and expects to be the world's fifth largest wind turbine manufacturer by the end of 2009.

The news has already led to one upgrade. Kaufman Bros. upgraded American Superconductor to Buy and raised its price target to $36. The analyst commented, "this announcement has four significant positive implications for the stock. First it shows that the backlog pipeline is getting refilled...Second, it shows that Sinovel is not making any near-term plans to work around AMSC designs...Third, this order validates the 3MW wind turbine product which should encourage other AMSC customers to take the next step. Finally, it shows that there is no let up in demand or financing for wind turbines in China, AMSC's core geographic segment...While the backlog may show weakness in the near term, we believe this order is significant enough in its own right to warrant an upgrade of the shares."

Shares of AMSC are up 8% today.

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