We do not have any plans on adding this stock to the portfolio at this time, however we do see enormous potential. Although this stock is priced a little high for us, the mere 100 million shares outstanding and small market cap has our interest, and we feel the stock could still see substantial moves from a percentage standpoint. Earnings will be released on February 4, and it will likely be very important for the company to hit it's guidance on all fronts and possibly even beat to avoid being taken down a bit. We believe any position in this stock should be at least paired, until earnings are released. Judging from the growth over the last two quarters, the guidance for the end of the year seems to be conservative. It is important to have realistic expectations for the stock. We can likely expect any gains to take twice as long, and be half as much as compared to the last 18 months or so. This could still be pretty stellar, however, and we feel that if the company beats estimates once again and guides a little bit higher, the forward and trailing P/E's will be so low that a 50% gain in a fairly short period of time would not be out of the question. What are the Risks? As of January 14, 2011, 48% of the shares were being held short, an extremely high level. This could simply be a function of the 2000%+ climb, or it could be pessimism in the overall alternative energy market. Either way, the shorts will add a ton of volatility, and any reaction to the coming earnings will probably be a bit more volatile than usual. The company's earnings can also change based on foreign exchange rates. A significant amount of the company's business is done in Europe and Asia, and they have not engaged in any hedging activities yet. Also, the company still has some significant debt, and any increase in interest rates would have an adverse effect. In the current environment, foreign currency and interest rates are expected to see quite a bit of volatility in near to mid term. Bottom Line Buy $10.00 Sell $15.00-$20.00 Stop Loss $7.85 Time horizon: 3-9 months Position Size: Small - Medium |
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January 31, 2011 PSW Staff |
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