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Company Power-One (Nasdaq: PWER  )
Submitted By: TSIF
Member Rating: 99.83
Submitted On: Oct. 31, 2010
Stock Price At Recommendation: $11.27

Power-One Profile

Star Rating ***
Headquarters Camarillo, Calif.
Industry Electronic components
Market Cap $954 million
Competitors and Peers

Emerson Electric (NYSE: EMR  )

Tyco Electronics (NYSE: TEL  )

Digi International (Nasdaq: DGII  )

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

This Week's Pitch:

Power-One, Inc had one of the most volatile post earnings days that many of us have seen in a long time when they announced earnings after hours on Thursday, (21 October, 2010). They beat analyst estimates handily and afterhours and premarket were up over 15%. By the end of the day they were off over 6% from Thursday's close, or a net delta of a 20% plus swing. There are several theories why this occurred. Key in the equation is the huge short interest this company has, partially due to some bonds and other financing, and partially due to their meteoric climb from $2.52 to $10.00. It is likely some of the shorts panic'd and covered Friday morning. Power-One's largest sales/revenue gains were in products used by the solar business. The Solar industry also took a huge hit Friday, First Solar [ (Nasdaq: FSLR  ) ] was down 8% which also certainly contributed to the reset downward of Power One. Theories abound and are well documented on Power-One's wild ride Friday. Much of the solar business hinges on subsidies in European companies which could expire and not be renewed. Other companies in competition ([Satcon Technology] (Nasdaq: SATC  ) ) are indicating pricing/margin pressures.

All in all, however, while I'm usually skeptical of a company that rises 5X in the course of a year, Power-One is forecasting a great quarter next quarter as well. They are bringing on more manufacturing capability and improving their product with a 3rd generation release. It's hard to believe that 38 Million shares traded hands Friday at a loss to the net share price after a company beats all analyst calls, guides upward, and has a forward P/E of sub-5 and a P/S of sub-1. Prior to their last few positive quarters, Power-One was losing money, so I do understand a lack of full investor confidence, but I suspect mutual funds and other's, willing to play this one "long" will swoop in on this one. My real life buy was much lower than my CAPS call, but I intend to hold "both" long.

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The Motley Fool is investors writing for investors. Dan Dzombak, who compiled this article, did not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. First Solar is a Motley Fool Rule Breakers recommendation. Emerson Electric is a Motley Fool Income Investor selection. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (12)

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 November 17, 2010, at 2:52 PM, krypystar wrote:


  • Report this Comment On November 18, 2010, at 2:37 PM, casey19555 wrote:

    SATC has given guidance for INCREASING margins. It is a utility scale only company and IS NOT being affected by pricing pressures affecting the other residential inverter companies..

    Your article is blatantly inaccurate and should be corrected as it affected the stock.

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