This Day On The Street
Continue to site
ADVERTISEMENT
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

Solar Losers: LDK Solar

XINYU City, China ( TheStreet) -- LDK Solar (LDK)disappointed in its earnings release on Tuesday morning. The backward-looking earnings shortfall, though, was less significant than a set of questions that dogged LDK Solar long before Tuesday, and that seemingly linger after the give-and-take between LDK management and analysts on the Tuesday conference call.

LDK shares ended down 7.8% on Tuesday, on close to triple the Chinese solar company's average trading volume -- 6.5 million shares traded versus 2.5 million shares.

It's possible that, given the general outperformance by many solar stocks in the fourth quarter, investors might have had unrealistic expectations for LDK. LDK gross margins were 9.9% in the fourth quarter -- half the third-quarter gross margin level of 20.1%.

Nevertheless, to put the weak fourth quarter into perspective, Gabelli & Co. analyst Hendi Susanto said he actually expected the gross margins reported by LDK to be worse than the actual margin deterioration.

What's more, ReneSola (SOL - Get Report), LDK's closest competitor among publicly traded Chinese wafer makers, also reported lower than expect margins in the fourth quarter.

ReneSola dipped beneath the $5 share-price mark in the week after its earnings disappointment, but its shares have benefited in the recent solar rally, back up to $5.92 at the close on Tuesday. ReneSola benefited specifically from a price target hike from $5 to $7 issued by Barclays Capital on Monday.

LDK's debt-laden balance sheet and its strategic initiative to move polysilicon production in-house are more of an overhang on LDK Solar shares. LDK is still working through a historical inventory of polysilicon that is significantly more expensive than polysilicon prices in the spot market -- $70/kg for LDK versus spot poly prices that some analysts expect will hit $45 this year.

What's more, LDK indicated on the call that it will need more financing and continues to work with Chinese banks to transition short-term debt to long-term debt. LDK had more than $69 million in short-term debt at the end of the fourth-quarter.

The Street was looking for more clarity from LDK as the Chinese solar company's management set a target of 15% to 16% gross margins in 2010.

1 of 4

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!
SYM TRADE IT LAST %CHG
LDK $0.00 0.00%
SOL $1.69 0.00%
AAPL $128.95 0.00%
FB $78.99 0.00%
GOOG $537.90 0.00%

Markets

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