Selling at the Wrong Time |
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 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. The Bad 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 Opportunity 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. Analyst Certification 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. Disclaimer This Opportunity Research report was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research and Goldman Opportunity Research. The Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. While stocks in the Opportunity format may have a higher risk profile, they typically offer greater upside as well. Goldman Small Cap Research has been compensated by a third party in the amount of $8,000 for a three-month research subscription service. The Firm does not accept any equity compensation. All information contained in this report was provided by the Company. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report or note is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This report does not take into account the investment objectives, financial situation, or particular needs of any particular person. This report does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. ALL INFORMATION IN THIS REPORT IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION. For more information, visit our Disclaimer: www.goldmanresearch.com. |