Energy Conversion: Still Basking in the Sun

• Email
• Share
• Print

On Monday, the U.S. markets turned up their noses at the newly created Chinese stimulus package. Given that fact, it appears that Energy Conversion Devices' (Nasdaq: ENER) share-price loss of just a nickel, after the company announced its September quarter results, may almost mean that it's blessed.

But why didn't the company's share price head north? After all, its income reached $12.7 million for the quarter, or $0.29 per share, versus a loss in the year-ago quarter of $7.6 million, or $0.18 a share. And the EPS line exceeded analysts' expectations by four pennies. So far, so good. On the top line, the company -- which easily qualifies as one of the leading manufacturers of solar products -- managed a 104% year-over-year improvement to $95.8 million, up from $47.0 million in the first fiscal quarter of 2008.

A big part of the problem is clearly that the solar sector in general -- like lots of other groups – is taking it on the proverbial chin these days. On Monday, for instance, First Solar (Nasdaq: FSLR), easily the group's Big Daddy, gave up $11.17, or 7.4% of its share price, probably thanks to an analyst downgrade. And smaller players Suntech Power (Nasdaq: STP) and Evergreen Solar (Nasdaq: ESLR) also saw their shares shed value, probably in sympathy. So almost by default, Energy Conversion became the star of the show.

All this is occurring in the face of the federal investment tax credit for solar having been extended recently, as my colleague Toby Shute discussed. The major difficulty for the group, in addition to a market that's generally taking no prisoners these days, appears to be concern about polysilicon pricing retreating in 2009. But because Energy Conversion makes a differentiated thin-film product, instead of panels to convert sunlight into electricity, it's likely to be somewhat protected from this wider-ranging concern.

So I'm inclined to keep a close eye on this one. While I don't believe it's especially inexpensive at current levels, management is forecasting revenue in the $455 million to $485 million range for the current June fiscal year, up from $256 million in the past year. If it makes it, it would prove to be a grower that's light-years beyond the concept stage.

Especially under the soon-to-be new administration, fascination with and funding for solar power is hardly going away. On that basis alone, neither should your attention to this unusually solid member of the sector.    

Energy Conversion has been accorded three stars by Motley Fool's CAPS players. This one probably deserves your vote.

For related Foolishness:

• The Senate Shines on Solar Power
• Basking in First Solar's Results
• Solar's Long-Term Forecast Is Sunny