The Evergreen Solar (ESLR – Last trade $8.51) stock price has done nothing over the last few months, unlike many of its peers in the solar sector. As we have pointed out before, ESLR's trump card technology – the ability to use less polysilicon to make solar cells – could become less valuable if the polysilicon supply problems are eventually solved. I still don't see ESLR as a takeover target, and up until today there has been nothing to get me excited about this stock.
The inspiration for this article is an interview with Shawn Kravetz, published in Barrons. Kravetz is the founder and president of Esplanade Capital, and he has already delivered 9.45%, after fees, over the last 5 months. His fund has gained 16.57% a year on average, after fees, for the past five years. The good news for solar investors is that Kravetz, who obviously knows what he is doing, is bullish on solar.
His favorite is ESLR, and he is very excited about the company's String Ribbon wafer technology. According to Kravetz, even if silicon prices were cut in half, ESLR would spend about 15 cents/watt on silicon, whereas an industry player would spend roughly twice that. If this is true, then I must admit that I have underestimated the significance of the technology. Kravetz claims that ESLR has a 20% cost advantage over its competitors.
ESLR's cost competitiveness is obviously an advantage, but I still feel that there are better stocks in the solar sector. However, Kravetz has an interesting idea: what if ESLR became a technology-licensing company? The company could license its String Ribbon wafer technology and reinvent itself as a business that generates a few hundred million in revenues with nearly 100% gross margins, Kravetz suggests.
I love the simplicity of this idea. Capitalism rewards companies using resources in the most efficient way. ESLR is a company running at a loss due to its expansion efforts. Why should investors give money to ESLR to expand operations when there are several companies that can expand more efficiently? It would be optimal for the solar sector if ESLR stayed focused on what it does best (the ability to use less polysilicon to make solar cells), and the easiest way to achieve this is to convert the company into a technology-licensing company.
Bill Cosby said it best: "I don't know the key to success, but the key to failure is trying to please everybody." ESLR should stop trying to please everyone and reinvent itself as a a technology-licensing company.
Disclosure: I do not own any stocks mentioned above. I do not own a solar panel.