On the issue of market hype getting ahead of market fundamentals -- which was the downfall of solar stocks in 2011 -- Johnson writes that "the 'hype' surrounding electric-vehicle sales has contributed to an unsustainable increase in separator capacity relative to the market size." The dynamic is misunderstood by investors, and that creates a market dislocation/shorting opportunity, the analyst argues. Since 2010, lithium ion batteries used in electric vehicles (21.3% of 2010 sales) has been by far the fastest-growing business segment for Polypore. The 2010 sales figure refers to electronic market sales, not electric cars specifically, but Johson believes that in the future the electric car market has to be a bigger part of that growing segment for the company to justify its current multiple -- 21x the Wall Street 2012 EPS estimate of $2.71. "With a widely anticipated explosion in Li-Ion electric vehicle sales by the lion's share of market pundits, and the fact that Li-Ion batteries used in electric vehicles require 300-400x more separator material than laptops, consensus expectations are for ebullient growth of Li-Ion separator sales driven largely by the penetration of Li-Ion vehicles as a percentage of aggregated vehicle sales. Yet, while we acknowledge that the initial capacity ramp by electric vehicle battery manufacturers resulted in a shortage of separator material 2009-2010, thus driving prices higher, we believe investors are grossly underestimating the enormous amount of separator capacity being added relative to the total addressable market (TAM) size," Johnson argued. Axiom Capital estimates that separator capacity being added is sufficient to support 2.3 million in annual electric vehicle sales, 12x and 6x greater than the amount of electric vehicles that will actually be sold in 2012 and 2013, respectively. "Over the course of the next 12 months as additional separator capacity comes online, we expect deteriorating order volume from battery companies for material, thus driving Li-Ion separator pricing lower. We believe PPO's margins peaked in 2011, and see severe risk to the company's operating margins in 2H12/2013 as pricing pressures mount," Axiom said. Polypore has been the only stock to play in the emerging lithium ion battery space. While President Obama called out high-tech batteries as an alternative energy sector where the U.S. will not cede its manufacturing prowess, the fate of lithium ion battery stocks has been grim.