Broadwind Drops, Sees First Half Bottom

NAPERVILLE, Ill. (TheStreet) -- Broadwind Energy(BWEN) is plummeting on Friday after a weaker-than-expected earnings in the fourth quarter, and Broadwind management's expectation that the first half of 2010 will represent a trough point for the wind stock.

Earlier this week, JPMorgan Chase(BWEN) initiated coverage of Broadwind with an outperform, as part of a thematic shift away from solar stocks and into the wind sector between now and 2012.

To put the JPMorgan call in favor of wind in the proper perspective, JPMorgan said in its call that Broadwind would hit bottom in the first half of 2010. Broadwind shares fell by more than 20% on Friday through the early afternoon. Broadwind's trading level of 5.5 million shares on Friday was well above its average daily volume of trading below 500,000.

The outlook that Broadwind management provided on Friday morning was the same outlook that the JPMorgan analyst provided: a bottoming in Broadwind shares in the first half of 2010.

In the end, for investors who buy into the wind story, the freefall in Broadwind shares on Friday and the management outlook for a bottoming in the first half of the year indicates that the best entry point to buy into wind as an investment theme may be yet to come -- despite the fact that JPMorgan and Raymond James initiated coverage of Broadwind at an overweight in the weeks leading up to the fourth-quarter earnings. Both JPMorgan and Raymond James were among the securities syndicate in Broadwind's early 2010 public offering.

Granted, just when the right moment to enter wind as an investment arrives -- if you believe in the wind theme -- is still unclear.

In fact, that bottoming may have been taking place on Friday as Broadwind's pretty ugly fourth quarter earnings report led to the share freefall.

The eternal question in investing is whether the damage will get worse before it gets better, or whether investors who wait to long to call a bottom will miss the rally.

There were some ugly individual numbers in the Broadwind fourth-quarter report. Overall, the fourth-quarter Broadwind results represented a worse-than-expected performance and demand environment for wind energy, even amid general pessimism about the first half of 2010.