The company raised sales expectations sky-high three months ago after experiencing a tremendous growth quarter, sending the stock on a magic carpet ride over the past three months. Last night's earnings report just about erased all those gains overnight because Power-One clearly overestimated its own strength.
That's not to say that the quarter was entirely without merit. Sales jumped 157% year-over-year to $366 million, slightly above the $360 million top end of management's already rosy guidance. So far, so good -- but that's where the gravy train stops.
The revenue outlooks for the coming quarter and fiscal 2011 fell far short of estimates. To explain the disappointing guidance, management pointed to bad weather slowing down solar-panel installations in Europe, excess inverter inventory in Power-One's distributor channels, and lower energy tariffs in multiple markets. Ouch.
Analysts have turned from a Greek "buy" chorus to calling the stock "dead money." The market is taking Power-One's weakness as mildly negative news for the solar industry, sending rivals First Solar
Fellow Fool Jim Mueller sees a "classic Messed-Up Expectation opportunity" in Power-One, and that was when the stock was riding high on that terrific third-quarter report. Do you see an outsized value in the company's healthy cash flows or an overvalued growth stock screaming "dead money?" Discuss in the comments below.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. First Solar is a Motley Fool Rule Breakers recommendation. The Fool owns shares of Power-One. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.