MEMC Elec. shares down after JPMorgan downgrade
SIOUX FALLS, S.D. --Shares of MEMC Electronic Materials Inc., which supplies silicon wafers used in chips and solar cells, fell Wednesday after JPMorgan downgraded the stock on worries that oversupply will drive down sales prices.
Shares lost 26 cents to $17.60 in morning trading.
JPMorgan downgraded MEMC Electronic to "Underweight" from "Overweight" because of the faster-than-expected average sales price declines in all of the company's product lines.
JPMorgan analyst Christopher Blansett said the Peters, Mo.-based company may need to revise its solar wafer contracts.
"An oversupply of polysilicon seems inevitable given the sheer volume of polysilicon that is expected to come online this year," Blansett wrote in a client note.
Blansett said that despite the lower demand environment, a number of long lead time polysilicon factories will begin production this year.
"This is resulting in a massive oversupply of polysilicon which could last for years if current announced capacity expansion plans are not scaled back," he wrote.
Blansett said spot prices for polysilicon are likely to fall well below the $50 per kilogram range in the second half of the year, which would force MEMC Electronic to again lower its spot solar wafer prices to remain competitive.
JPMorgan lowered its 2009 earnings estimate by 5 cents to 19 cents per share on $979 million in revenue, and its 2010 estimate by 11 cents to $1.06 per share on $1.36 billion in revenue.
Analysts polled by Thomson Reuters expect a 2009 per-share profit of 33 cents on $1.1 billion in revenue, and a 2010 per-share profit of $1.20 on $1.5 billion in revenue. 