Evergreen Solar: Know When to Hold

The Wunderlich analyst cautioned investors about accepting any financing solution presented by Evergreen. He noted that there have been examples in the past of equity lines of credit in the alternative energy sector that provide special investors with the right to sell common shares of stock at a discount to the previous week's share price. An equity line of credit that disadvantages current shareholders of Evergreen Solar would not be an actual financing solution in the opinion of the analyst.

The macro environment remains "terrible for solar panel makers," in the opinion of the Wunderlich analyst. However, O'Neill's model for Evergreen assumes a successful transition to China that would result in manufacturing costs dropping faster than the decline in average sales price -- a 24% decline in ASPs in 2011, versus a manufacturing cost decline of 29%.

Of course, this Evergreen Solar scenario is predicated on the solar company making it to 2011. At this point, JPMorgan and Wunderlich think they know when to hold Evergreen Solar shares. However, the manufacturing transition to China could still be a slow boat to bankruptcy for solar investors with a big risk-appetite.

-- Reported by Eric Rosenbaum in New York.

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