Wednesday, May 12, 2010

Morgan Stanley, Deutsche Talk Nice About A123 (AONE)

Morgan Stanley and Goldman were joint bookrunners on the IPO.
Bank of America/Merrill Lynch, Deutsche Bank Securities, Lazard Capital Markets and Pacific Crest were co-managers.

The stock is trading down a nickel premarket at $10.11 which is down 25.1% from the $13.50 IPO price.
From Notable Calls:

A123 Systems (NASDAQ:AONE): Colour on quarter - Bounce?

A123 Systems (NASDAQ:AONE) is getting some fairly supportive tier-1 commentary following results out last night:
- Morgan Stanley notes that new wins and capacity growth should offset Q1 miss.

AONE announced plans to expand capacity by a further 200 MWh to 760 MWh, enough to power approx 50,000 PHEVs or 380 grid batteries, assuming an average PHEV battery of 15kWh and a grid solution of 2MW. This should instill confidence in potential customers that AONE will be able to meet demand, according to MSCO.

New wins show momentum: AONE announced a new development contract with “one of the largest automotive manufacturers” to develop next-generation battery cells. Firm thinsk working with a large OEM is an encouraging development for AONE, especially if it could lead to a production contract. AONE also won a pilot program with Eaton for a fleet of PHEV medium duty trucks, another win in the company’s impressive commercial vehicle contract portfolio.

Investment thesis: They see substantial potential for upside if the company’s technology and production ability prove out. Risks are many, including need to reduce costs faster than competition over a 5-year curve, need for early wins to build scale, and execution risk in ramping from minimal revenues to potential billions in under 5 years.

Firm maintains their Equal-Weight rating but notes that their base-to-extreme-bull-case scenarios range from $25 to $54/share.

- Deutsche Bank is reiterating Buy and $17 target on AONE saying yesterday's commentary reinforces their positive thesis...MORE
Notablecalls: I would not be surprised to see AONE stage a bit of a comeback following yesterday's capacity announcements. The results missed consensus by a hair but lets face it - the current $24 mln revenue number is nothing compared to $800 mln run-rate DB sees for 2012.

The stock has been crushed since the IPO & may be due for a bounce. Right now, it's all about capacity & deals with automakers. AONE has both.

Would keep the position small as this is a highly speculative stock.