North Coast Solar Stocks

September 28, 2009

Applied Materials upgraded on coming SunFab orders

Filed under: AMAT, WFR — Tags: , , , , , , — Jason @ 12:36 pm

Applied Materials upgraded on coming orders for solar production equipment, MEMC downgraded

Monday September 28, 2009, 12:36 pm EDT

PHILADELPHIA (AP) — Shares of Applied Materials Inc. (AMAT) advanced on Monday after a Citigroup analyst upgraded his recommendation on the stock based on “significant” upcoming orders for its solar modules production equipment.

Analyst Timothy Arcuri raised Applied Materials, a maker of chip production equipment, to “Buy” from “Hold” and added the stock to Citi’s top picks list for investors, replacing MEMC Electronic Materials Inc (WFR). He also raised his Applied Materials target price by $2 to $17 and bumped up his 2010 earnings estimate by 4 cents to 46 cents per share.

Wall Street analysts expect 2010 earnings of 33 cents per share, according to a poll by Thomson Reuters.

Arcuri said checks at the Hamburg solar show led him to believe that Applied Materials is about to sign a “significant” second wave of orders for its SunFab solar production equipment, including four new lines of about 300 megawatts in India.

While the analyst noted that SunFab’s long-term success isn’t certain given that module prices are falling in the market, the company is adding new customers, cutting costs, lined up about $1 billion in savings and has a renewed focus on regaining market share. These factors are enough to drive the stock higher, Arcuri said in a research note.

As the largest solar equipment provider, Applied Materials also will benefit from market growth in 2010 and sidestep the problem of weakened pricing.

“As these catalysts play out, the Street will no longer be able to ignore the stock,” Arcuri said.

Shares of Santa Clara, Calif.-based Applied Materials rose 42 cents, or 3.2 percent, to $13.52, in midday trading.

While Applied Materials got kudos, the analyst was bearish on silicon wafer maker MEMC, which he downgraded to “Hold” from “Buy.” He cut his target price to $20 from $24. He said the company’s polysilicon production problems still are unresolved, thereby risking missing seasonal demand and could lead to its missing this quarter’s financial outlook.

Earlier this month, MEMC reduced its third-quarter revenue forecast due to a disruption at a polysilicon Texas plant caused by equipment failure. The failed equipment was replaced but new problems delayed production again.

Arcuri slashed his 2010 earnings estimate for MEMC to 73 cents per share from $1.33, and to $1.56 from $2.82 in 2011. Analysts expect the company to post a profit of 98 cents per share in 2010, and $1.86 per share in 2011.

Shares of St. Peters, Mo.-based MEMC dropped 55 cents, or 3.2 percent, to $16.75.

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