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Stock Ideas Wall Street Stock Ideas American Superconductor Corporation: Wind Energy Powerhouse
Stock Ideas Wall Street Stock Ideas American Superconductor Corporation: Wind Energy Powerhouse 
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By Chris Johnson Dear Reader, Investors vote their approval and disapproval of the Fed by buying or selling stocks. So last week’s 25 bp cut to key interest rates seems to have disappointed, even though the writing of this outcome was clearly on the wall. It was interesting that the Fed announced a plan to... |
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| American Superconductor Corporation: Wind Energy Powerhouse |
| Tuesday, 08 July 2008 | ||||||||
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As Coffey points out, "Originally founded to develop highly conductive wiring for power systems, American Superconductor has used that expertise to expand into a few promising areas, the most significant of which is wind turbines. While American Superconductor already had some exposure to the business, it transformed itself into a wind energy powerhouse with the acquisition of Austrian firm Windtec in early 2007." Indeed, on June 10 American Superconductor announced a $450 million order for core electrical components for wind turbines from China-based Sinovel Wind that sent the stock to eight-year highs. Coffey likens the business model of the Windtec division to that of Gillette razor blades. "The Windtec division designs wind turbines that other companies incorporate into the wind towers they build on behalf of wind farm customers. The arrangement is a lot like razors: You buy the razor itself, but then you have to buy the blades repeatedly in order to be able to use it," explains Coffey. "As Gillette found out many years ago, there's money to be made in selling the razor, but much better profits to be found in the blades." Recent reports have indicated that China plans to spend $1.5 trillion over the next 40 years on its electricity infrastructure, according to Coffey, and ASC already has a foot in the door. "In the U.S., utilities are expected to double their wind power spending this year. China is expected to ramp up even faster; by 2020, China wants to increase its wind energy capacity more than 13-fold to 80 gigawatts," says Coffey. Coffey also points out that American Superconductor has other major clients with favorable arrangements, including Germany's Fuhrlander and Canada's AAER. It also recently announced its first deal in India, with Ghodawat Industries, to market turbines based on Windtec designs to India, the Middle East and Africa.
For the fiscal fourth quarter ended March 31, 2008, American Superconductor booked revenues of $38.4 million, a 101% increase from a year earlier. The company recorded a smaller-than-expected net loss for the period of $1.8 million, or $0.04 per share, compared with a net loss of $11.4 million, or $0.33 per share, in the same quarter of 2006. Wall Street was expecting a wider net loss of $0.11, which means the company surprised by 63.6%. The net loss included a $3.6 million charge in restructuring and impairment charges related to consolidation of American's operations in Massachusetts. The bottom-line result also included a gain of $0.9 million from a mark-to-market adjustment on an outstanding warrant. For the first fiscal quarter ended June 30, 2008, eight analysts surveyed by Thomson Financial are on average projecting a net loss of $0.06 per share, compared with a year-earlier loss of $0.27. Analysts are pegging revenues for the three-month period at $40.3 million, up from $19.8 million last year. For fiscal 2008 ending March 31, 2009, the company expects revenues of $165 million to $175 million, and a net loss of between $9 million to $12 million, or $0.21 to $0.28 per share. For fiscal 2007 the company booked a loss of $0.65 on revenues of $112.40 million. For the past year, American Superconductor has been trading in a range of $15.51 to $47.54. Most of last week the stock was fluctuating around the $36.00 level. By Ian Wyatt, Chief Investment Strategist, NewsletterAdvisors.com
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