It is odd that on the same day of SSIE's selloff, an article was published touting the fact that solar is back, and that the worst is over, as evidenced by the leading indicator, polysilicon prices and sales. These events indicate that in the near future, SSIE's TCS business will, and may already have, experienced the same characteristics, right behind the polysilicon players. As a result, SSIE should be moving higher, not lower
The Good, the Bad, the Opportunity:
The good for SunSi is easy to see. This is helped by the fact that management issued a press release early this morning which affirms the theme of the Bloomberg solar industry article and provides insight into SSIE's overall positioning. Clearly, prices in the space have stabilized and China is fueling the industry's growth, which dovetails with the SSIE strategy. Moreover, the Company has successfully diversified its geographic revenue base with an order in 2011 and recent press releases appear to indicate new foreign orders are in process. Based on the Company's marketing efforts, we believe that more orders could be closed this quarter, strengthening SSIE's position.
SSIE is a provider of TCS to some of the largest polysilicon producers in the world, which is an affirmation of its high-quality, low-cost offering. Industry consolidation may also boost its market share, as SSIE is positioned to be the dominant pure-play provider. A reduction in cost of goods, as noted in the release, will also boost gross margin profitability, beginning in the current quarter.
Investors should expect a return to normalized sales volume and pricing in 1H12 and greater profitability
We remain very positive that the move to NASDAQ is forthcoming, which will boost share volume and the stock price.
Perception is that solar is "in the rough" and that it will be a while before SSIE can get back to par. The NASDAQ move has taken a bit longer than expected, which may have spooked some investors.
The selloff which is wrongly based in part on market perception presents a great time to establish a position. It reflects the past, not the present or the future and is a gift to savvy investors. As noted above, with SSIE serving as a lagging indicator, a move higher, in tandem with the other solar stocks is around the corner. Each time management scores a new "win" outside of China the stock should also benefit investors. Finally, the move to NASDAQ, in our view, is a fait accompli, serving as a big driver back to $4.00 or higher.
We maintain our Speculative Buy rating and believe that the stock could reach $6.00 during 1H12.
Analyst: Robert Goldman
Rob Goldman has over 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell-side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund.
I, Robert Goldman, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report.
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