North Coast Solar Stocks

June 30, 2008

Emcore shares fall sharply on downgrade; Counterpoint by Second Analyst

Filed under: EMKR — Tags: , , — Jason @ 3:39 pm

Monday June 30, 3:39 pm ET

Emcore shares decline after Canaccord Adams cuts shares to ‘Hold,’ saying demand is overstated; Jefferies & Co. analyst disagrees

NEW YORK (AP) — Shares of Emcore Corp. tumbled on Monday after a Canaccord Adams analyst downgraded the maker of fiber optic and photovoltaic components, saying he is skeptical about demand from a major Korean customer.

Jonathan Dorsheimer said a recent trip to ES Systems’ headquarters in Korea led him to believe that demand expectations from the company for Emcore’s photovoltaic components is overstated.

Actual demand for Emcore’s products at ES Systems was about two thirds of what Emcore seems to believe, he said, and downgraded shares of Emcore to “Hold” from “Buy.”

Dorsheimer also cut his price target to $7 from $9 and lowered his full-year earnings estimates for the next two years to account for more conservative demand in Emcore’s solar division.

“We feel that expectations have gotten ahead of themselves, in spite of the sell-off. Further, failure to deliver on announced contracts would be likely to perpetuate management’s lack of credibility, a key overhang with this stock,” Dorsheimer wrote in a note to investors.

Shares of Emcore plunged 91 cents, or 12.7 percent, to $6.31 in afternoon trading.

Emcore representatives could not immediately be reached for comment.

Shares of Emcore have declined about 53 percent since the start of the year.

Additional Comments Posted on:
http://blogs.barrons.com/techtraderdaily/2008/06/30/emcore-down-14-as-canaccord-rips-korea-solar-deal/

Jefferies & Co. analyst reply: EMCORE Corporation (EMKR, $6.18, Buy, PT $20, Mkt Cap.485MM)

The stock is weak on a competitor’s downgrade based upon their trip out to Korea. We had an opportunity to speak with EMKR management this morning on these issues, and would make the following counter points for clarification.

1) EMKR backlog of 70MW Modules matches ES Systems orders of 45.5MW Systems
– EMKR has orders for about 70 Mwatt of Solar Modules to ES Systems (ESS – Korea). When the competitor’s analyst asked ES Systems how much Systems orders they had, he identified about 45.5MWatts.

Our point – EMKR will ship the ESS 70 Mwatts of modules at 40% Solar efficiency, this equates to about 44-48Mwatts of Systems output at 25% Solar efficiency. So the EMKR backlog for ESS matches their System orders and we see no problems with that.

A simple analogy is when building a custom car – If you order a V8 engine in a crate, rated at 480 Bulk Peak HP and put that in a car, you hook it up with exhaust, transmission, axles, and to the tires. The output of the car to the back wheels may be 420HP, so 60 bulk HP was lost through the system (car). So when you ask how much power the car produces, I would say 420 HP (ESS would say 45.5Mwatts of system orders). To get that amount of power, one would have to start with and buy a 480 HP engine (ESS has to buy 70MW of Solar modules).

These numbers, if understood as components versus systems, do match. As a result, we remain comfortable with the EMKR backlog

2) We spoke to EMKR on their receivables and backlog – EMKR continues to get orders from around the world for CPV Solar modules and Systems, and backlog continues to grow. Payments and receivables are all up to date.
Specifically, EMKR has worked with ES Systems for a while, all payments are up to date and their funding remains very solid.

3) EM Solar management changes – Will impact the roll-out, but EMKR shipped product for their systems this Q
Comment by Mmarlin7 – June 30, 2008

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