MEMC Electronic Materials (WFR), which sells silicon wafers, is poised to benefit from a polysilicon shortage. FBR reiterates its Outperform rating on WFR as they see many positive catalysts for the stock, including strong poly prices.
Continued manufacturing progress:
Recent checks suggest that WFR, following fixes of all the problems, has continued to see progress in streamlining manufacturing bottlenecks (that caused a shortfall in 1H shipment/revenue expectations), with Unit 3 running at near capacity while Unit 4 has already started with TCS production.
Strong spot market:
Unlike what some module manufacturers have been hoping for, poly prices have remained strong (approximately $400/kg), with recycled poly prices actually up 20%.
Poly production from China won’t be significant for some time:
Consistent with our thesis, one of the problems causing delays in poly out of China (thus preventing China from helping to ease the poly shortage) is the actual inability of Chinese poly manufacturers to
manufacture their own silane/TCS gasses. This has become such a severe problem that even some of the same Chinese poly manufacturers who were supposed to be fierce competitors of WFR are approaching WFR for the purchase of TCS gasses.
Friedman Billings reiterates OUTPERFORM on MEMC Electronic Materials (WFR), target price $100.
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