This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Price Hike Powers Shares of MEMC

MEMC Electronic Materials (WFR) may be providing a model for companies hit by rising commodity prices -- control your own supply chain.

Shares of the silicon-wafer manufacturer jumped again this week to sit at just under $20 -- a five-year high -- as investors see good things from rising silicon prices.

While MEMC makes wafers, it also makes its own polysilicon, the central building block of semiconductor chips and the main ingredient used to make the wafers used to build microchips for electronics gear.

Polysilicon has become scarce due to capacity constraints and growth of the solar energy market , which also uses the material to make solar panels. As a result, polysilicon prices have pushed up to more than $45 a kilogram from the mid-$30s just 12 months ago. And prices are seen reaching $60 a kilogram next year.

Since MEMC makes 90% of its own poly, it appears to be in great position to pass along most of these rising prices to customers.

This possibility has been apparent for months, but investors have recently flocked to MEMC's shares as the supply and demand imbalance has become more apparent. Normally an issue that remains far back in the electronics supply chain and well removed from the end customer, the dynamic is attracting increased scrutiny from the mainstream.

In July, CEO Nabeel Gareeb said during the company's earnings conference call that customers had yet to try engaging in early negotiations for 2006 contract pricing, but he expected "that instinct will start arising in people this quarter or next quarter."

He said that when poly prices last rose -- two years ago -- everyone in the industry participated, regardless of whether they were experiencing higher costs or not. "The guys that don't have poly supplies in house will get price increase passed along to them," Gareeb said, noting that customers of those companies will have to accept a lower rate of return. "We are not willing to accept that."

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
WFR $0.00 0.00%
AAPL $128.95 0.00%
FB $78.99 0.00%
GOOG $537.90 0.00%
TSLA $226.03 0.00%


DOW 18,024.06 +183.54 1.03%
S&P 500 2,108.29 +22.78 1.09%
NASDAQ 5,005.3910 +63.9670 1.29%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs