As we pointed out in a previous note on Solarworld, management could have used yesterday’s analyst day to provide greater operational visibility to investors. Instead, they lowered revenue guidance without providing production and price estimates. SolarWorld was the worst performer on the TecDax, dropping €2.70, or 4.50%, to €57.30.
During the analyst day, SolarWorld (SWV.DE – Last trade €57.30) guided a 20% increase in operating revenues for 2007, below the 36% increase they previously guided. Earlier this year, SolarWorld management had previously suggested that the 36% increase in January sales would be a good indicator for the year. Last year, operating revenues rose 45% at the company.
SolarWorld said that the 20% growth in operating revenue guidance was conservative, but that’s not the point. They should have provided quantitative insight into their sourcing situation, instead of confusing investors with overly cautious guidance. As we pointed out before, there is simply no excuse for their lack of operational visibility. It is almost impossible to predict how much silicon will be available in 2009 or 2010, but surely SolarWorld has very good insight on the amount it has sourced via its long-term contracts? Most solar companies provide this guidance, so SolarWorld won’t be giving away trade secrets.
Going forward, SolarWorld’s share price will likely be supported by M&A speculation. Frank Asbeck, the company’s CEO, said that the firm may become a takeover target, adding that General Electric, Intel and Siemens could be potentially interested. But Asbeck, who holds about 25% of SolarWorld, said he was not planning on selling his shares.
SolarWorld looks expensive, and there is limited upside to the share price in the absence of operational visibility.
Disclaimer: I do not own any stocks mentioned above. I do not give investment advice. Do your own research. Do not rely on anything in this blog to make investment decisions. Consult an investment professional familiar with your specific financial situation before buying or selling any security