2-Star Stocks Poised to Plunge: American Superconductor?

Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, power generator equipment maker American Superconductor (Nasdaq: AMSC  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at American Superconductor's business and see what CAPS investors are saying about the stock right now.

American Superconductor facts

Headquarters (Founded)

Devens, Mass. (1987)

Market Cap

$1.62 billion

Industry

Electrical components and equipment

Trailing-12-Month Revenue

$215.9 million

Management

Founder/CEO Dr. Gregory Yurek

CFO David Henry

Return on Equity (Average, Past 3 Years)

(17.5%)

Cash /  Debt

$95.4 million / $0

Year-to-Date Return

125%

Competitors

ABB (NYSE: ABB  )

General Electric (NYSE: GE  )

Siemens (NYSE: SI  )

CAPS Members Bearish on AMSC Also Bearish on

Lennar (NYSE: LEN  )

Ener1 (Nasdaq: HEV  )

CAPS Members Bullish on AMSC Also Bullish on

Suntech Power (NYSE: STP  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 18% of the 604 members who have rated American Superconductor believe the stock will underperform the S&P 500 going forward. These bears include smartdanny and All-Star mrindependent, who is ranked in the top 2% of our community.

Just two days ago, smartdanny tapped the stock as a particularly unprofitable situation: "I think that the stock market is going to start heading lower soon. If and when it does, companies like this with little in the way of earnings are going to get killed."

In an earlier pitch, mrindependent expands on American Superconductor as a quick way to get winded:

American Superconductor Corp is presumably positioned to take advantage of the rising interest in wind power. Revenues have grown dramatically over time, but profits stink. The company hopes to generate a $1.5 million profit for fiscal year 2010, but this is hardly enough to justify its market cap (which is more than 4 times book). This stock is likely to be incredibly volatile. The key is sell on the upswings and buy back stock on the downswings.

What do you think about American Superconductor, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Suntech Power is a Motley Fool Rule Breakers recommendation. ABB is a Global Gains pick. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (7) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 18, 2009, at 12:00 PM, njdo wrote:

    article on amsc at citron research

  • Report this Comment On September 19, 2009, at 10:04 AM, MoneyWorksforMe wrote:

    Mr. Independent's comment was posted prior to the release of AMSC's last quarter results, which were GREAT. The stock surged 28% immediately following those results, reflecting that AMSC is finally achieving what many thought they couldn't. High growth stocks are difficult to value and this one is no exception. Next quarter's results will be very telling, particularly if they beat on the top line by a significant margin as they have the past few quarters. AMSC has a very solid footing in China where their products are unrivaled. They are now opening a business in India to increase exposure in that market, where they have already made some business, receiving orders from a few large wind turbine firms. The fact that AMSC's stock has made such a dramatic move while GW legislation has taken a backseat to Healthcare is also very telling. When the focus is back on a GW bill, I think NEW investors will look to AMSC as a way to exploit the GW bill. Additionally, from a technical perspective I like the way this stock has moved, in the sense that there have been many significant dips along the way making for good entry points for NEW investors to get in. In my experience, this tends to significantly decrease any downward pressures on a given stock.

  • Report this Comment On September 19, 2009, at 1:52 PM, SoundJudgement wrote:

    Regardless of the extrent of legislation, which I do not rely upon, AMSC has positioned itself around the world in order that its standard may be utylized. Their aquisitions and partnerships are in huge markets. These are long term propositions with apparently influential players, which have already begun to result in contracts with reliable companies, i.e. State Owned Chinesse. These are the real deal.

    Still the hidden gem is the overall technology which is superconducting wire. The implementation of power transmition without resistors is the most impressive factor. AMSC has paid its dues landing relatively modest paying navy contracts to successfully demonstrate and improve it technology in this area. They are at the forefront of becoming the most intuitive and groundbreaking company of our time. My only fear is the lack of inside ownership, which makes me paranoid about them losing their technology to others. Sorry Great Board and Founders. Thats likely my own issue. Still, The companies actions seem consistant with long term planning and the best interests of the company.

    They have delivered profits way ahead of my schedule and that was due to wind power applications. The overall upside is huge.

  • Report this Comment On September 19, 2009, at 3:48 PM, MoneyWorksforMe wrote:

    SoundJudgement--I agree with you. But what is your take on all of the insider selling? This is one of my only concerns as well. Historically speaking, this has happened prolifically over the past few years--predominately by the CEO. So the more recent selling, doesn't signify a negative trend to me. I'm also wondering if Greg Yurek CEO works for a minute salary and gets paid primarily through the company's stock--that could explain why he sells so often--to maintain his own lavish "CEO" type lifestyle. Thoughts?

  • Report this Comment On September 22, 2009, at 12:54 AM, badams77 wrote:

    Sore about the downgrade as i'm hold AMSC, could this just be the because the Kaufamn Brothers, are looking to buy into a promising company on the up. The quoted threat was that a general downturn in the US stock market or economy would damage AMSC. AMSC is has lots of US gov contracts, and most if not most of its other income is foreign, so is well placed to handle a US downturn. In fact a chinese or indian downturn would probably hurt AMSC more. AMSC is a rising company, is Wind electric system has recently turned it into profit, but with out doubt it will its advanced superconductor systems, (2+years out), that will make it a future winner. Buy the dips!

  • Report this Comment On September 22, 2009, at 12:36 PM, souladventurer wrote:

    AMSC is a no lose company right now over the long term. Of course the market dips will happen and such unfounded "news" or downgrades will drive the stock down, but the company is positioned to take full advantage of China's heavy push into wind. They have established themselves as a major player, particularly with their partnership with Sinovel. Beyond that, every country in the world is going to have to upgrade/revamp their powergrids to both transmit renewable energy more efficiently and to keep up with growth in power consumption. AMSC is positioned as a leader in smart grid technology. But even more positive, is their HTS cables, which can transmit 10 times more power with no electromagnetic leakage. Meaning this is the first and most efficient solution to retrofitting existing grids. They have great relationships and history with the DOE and thus will be tapped for this growth in the U.S. And their relationships in China and India will continue to pay off multifold.

  • Report this Comment On September 22, 2009, at 9:30 PM, Fool wrote:

    AMSC will be a 50 stock in 6 months.

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