Tuesday, March 30, 2010

"LDK Solar Not Interesting After Q4" LDK

One of the harshest put-downs I ever saw was an elderly socialite matriarch listening to an eager-beaver from the family office going on and on about their superlative relative performance.

She knew more about this stuff than he ever would and rather than cut him short on 'relative performance' she cut him dead with "You bore me".

Kinda like the BloggingStocks headline. Here's the story:
The solar power industry is no doubt a fascinating long-term thesis; future solutions for global energy needs, ones that involve alternatives to oil-based platforms, will be in demand. Even so, that doesn't mean I have to like LDK Solar (LDK) after its fourth-quarter report.

According to TheFly.com, LDK Solar didn't score a win in the analyst expectations game. The call was for 12 cents per share. On an adjusted basis, the Chinese solar entity brought in only 3 cents per share. The top line was okay, but as indicated, margin quality wasn't necessarily the greatest. According to Reuters, management is counting on margin improvement in the coming year. That's cool.
But is it cool enough for me to buy the company's ADSs? No, I'm afraid not.

The earnings miss is bad enough. But the drop in the share price is even worse. At the time of this writing, LDK Solar was off by 7.5%, and volume was cooking; the number of shares traded will be pretty high by the end of the current session....MORE
The stock closed down 7.8% at $6.50.
Here's another angle from Schaeffer's Research (3/29):

LDK Solar Co., Ltd. Bears Betting on a Post-Earnings Plunge

Investors are none too happy heading into the solar firm's quarterly report

Solar wafer manufacturer LDK Solar Co., Ltd. (LDK) is scheduled to release its quarterly earnings ahead of the open tomorrow morning, and judging from the stock's sentiment backdrop, investor expectations are set pretty low for the event. Checking in with the analyst community, Wall Street is expecting the company to post a profit of 12 cents per share, a figure that is impressively higher than LDK's loss of $1.25 per share in the same quarter last year.

Historically, the company has been a volatile performer on the earnings stage. During the most recent reporting period, LDK posted a profit of 27 cents per share, some 430% better than the consensus expectations for a loss of 8 cents per share. However, the firm missed by 123%, 250%, and 48% in the three quarters prior. On average, LDK has fallen short of analysts' estimates by about 4% during this time frame.

Apparently keying off the past year's poor fundamental performance, options traders appear to have set the bar pretty low. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.68 arrives higher than 84% of all such readings taken during the past year. What's more, this ratio has trended higher since March options expiration, jumping from its March 19 reading of 0.95, in the 65th percentile. This rise in LDK's SOIR indicates that puts are being added at a faster rate than calls among near-term options, pointing toward growing bearish sentiment among these speculative investors....MORE