Tuesday, September 8, 2009

MEMC Electronic: Upgraded to Outperform at FBR WFR) Capital

Last Friday we linked to a Schaeffer's post in "Call Trading Skyrockets on MEMC Electronic Materials (WFR)". Today the company announced "MEMC plant closing to affect 540 workers".
The stock is down forty cents in early trade. Here's the headline story from Notable Calls:
FBR Capital is upgrading MEMC Electronic (NYSE:WFR) to Outperform from Market Perform and raising their price target to $22 (prev. $16).

Firm notes their checks last week in Taiwan indicated that MEMC Electronic Materials not only has been able to gain considerable market share in the solar side, it also has been able to regain some of the semi market share lost a few years ago in Korea and Taiwan. Yes, such share gains have come at the expense of lower margins (versus historical trends, especially following past recoveries in the semiconductor industry). However, FBR Capital believes the gains are already baked into expectations and share price, as the company, in their view, set guidance low enough to be able to execute successfully. Moving forward, and consistent with FBR's solar industry thesis, they expect the overall GM to peak in the 30s, nowhere near the 50%-plus when poly was sold into the spot market at exuberant prices. However, they believe the new management "gets it" that both solar and semiconductor industries are commodity-type industries, and thus the inflated GM profiles of a few years ago will not happen again—at least, the firm does not expect that....MORE
...Notablecalls: Expectations regarding WFR's n-t performance are low here and FBR's call will make a difference .

I think WFR can trade up 1pt today (towards $17.50 level) and possibly to $18 in the coming days.

I'd love to hear what JP Morgan Semi team will come up with (they have been very neg. on WFR lately).