Yesterday the worst-case scenario came true for American Superconductor
A company statement said, "Sinovel refused to accept contracted shipments of 1.5 MW and 3 MW wind turbine core electrical components and spare parts." After this blow, the company now expects fourth-quarter revenue to be just $42 million, and the company will report a loss for the quarter.
Analysts and investors have been worried about American Superconductor's reliance on Sinovel for revenue, but this comes just as the company is beginning to diversify. It is getting into power inverters for solar and wind power plants, competing with Satcon Technology
What in the world do I do now?
Now the question becomes whether to jump ship, hold steady, or look at this as a buying opportunity. American Superconductor doesn't have any debt and is expecting to report cash and equivalents of $240 million, or $4.73 per share, when it reports results, so that can be looked at as something of a backstop.
Could this possibly get any worse? This is obviously terrible news, but there are some bright signs to point to in the future. American Superconductor's market cap is down to $645 million, and new customers and products are ramping up. Plus, unless the relationship goes completely south, Sinovel isn't completely disappearing from the future. Admittedly, I thought this stock was a good deal at $26, and I may add to my position after this drop. Maybe I've had the wool pulled completely over my eyes but the future of American Superconductor seems too bright, and all of the downside almost eaten up. I'm not jumping ship -- but I am a little seasick today.
Fool contributor Travis Hoium is in pain today because he's long AMSC stock and has sold AMSC put options, ouch. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.
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. The Motley Fool has a disclosure policy.
More from The Motley Fool
American Superconductor Failing to Meet Potential
This was once a high-flying company, but now its survival is in question.
5 of Last Week's Biggest Winners
These five stocks came through with double-digit percentage gains this past week
American Superconductor Still Faces Big Challenges
The beaten-down, energy-infrastructure company is still reeling from the loss of a major customer. Can it recover?