FBR previews MEMC Electronic Material’s (WFR) mid-quarter update and says that despite strength in the company’s solar wafer shipments, weak semiconductor demand will offset those gains. MEMC remains one of few solar stocks that bearish FBR considers “attractive.”
FBR’s recent checks suggest that solar wafer shipment from MEMC into solar customers improved from June to July, and the total shipment in the first three weeks of August has already exceeded the total shipment in the month of July:
We note that SunTech (STP, MP), one of the largest solar wafer customers at MEMC, exceeded 2Q expectations when STP reported last week, with 3Q guidance of 22% sequential growth in revenues, which was 5% above our previous expectations. Such an example gives us incremental confidence that MEMC has “at least” remained on track with capacity additions, and so far, no hiccups.
Howver, FBR also believes that demand from the semiconductor industry, particularly from foundries, has marginally weakened over the past six weeks.
To that end, we expect semi unit shipments in 3Q to come in flat QOQ, below the seasonal average of several points growth. Assuming a few percentage points decline in the blended ASP (for the semi industry), we conclude overall semi-related revenues down a few points QOQ, which is also below historical trends. We estimate the semi-related revenues to account for 55% of the total revenues by the end of 3Q.
FBR maintains OUTPERFORM on MEMC (WFR), target $80.
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