Friday, September 7, 2012

Power-One Price Falls After Sale Rumor

Power-One's (PWER $6.00) stock experienced volatile trading Thursday amid rumors that the solar technology developer is seeking a buyer for the company. The stock price climbed to $7.12 at 11:05 this morning, roughly the same time this was posted by Paul Murphy on the Financial Times' Alphaville blog. Thirty-three minutes later, the price had sunk to $5.84. It eventually recovered to $6.03 by the market's close, down $.48 from an open at $6.51. The price had been rising steadily on buyout speculation. But Murphy's report cast doubt on investors that a sale was realistic.

The company still appears on track to post good third-quarter results. Guidance suggests $270 million in revenues, though gross margins could slightly dip. We've given our earnings estimates a slight bump: we now see $1 billion in revenue for 2012, up from our previous estimate of $980 million. Our earnings per share estimate is now $.63, from $.60. Other analysts are predicting revenues slightly above our outlook, but it really depends how fourth quarter sales are impacted by European regulations. The United States' tariff on Chinese solar cells could also lessen solar demand stateside, although those tariffs have yet to be finalized. It is also concerning that the U.S. may decide to apply the tariffs retroactively.

Power-One is releasing its Aurora Ultra inverter next week, which at 1.4 MW boasts the highest capacity in the solar market. The Ultra is designed for utility-size installations. In addition to the industry-leading generating power, the inverter requires fewer wire hookups and shouldn't take as long to test as other inverters. The company is also continuing its efforts to penetrate Asia. It expects sales to India to double in 2013. Stiff competition is hindering expansion in China.

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