Zacks Analyst Interview Highlights: Energy Conversion Devices and SunPower

Business Wire, June 13, 2008

CHICAGO -- Zacks.com releases the latest Analyst Interview. Today's interview is with senior analyst Jon Kolb, who discusses Energy Conversion Devices (Nasdaq: ENER) and SunPower (Nasdaq: SPWR).

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What is your view on the overall alternative energy sector at the present time?

The investment outlook for the alternative energy industry is bullish, in our view, with significant growth potential over the next 5-10 years. As with any burgeoning industry segment, there will likely continue to be rapid changes within individual names as new technologies continue to evolve, although the longer-term trend is favorable for diversified long-term investors.

Let's start with one such name you recommend.

We remain optimistic about the Energy Conversion Devices' (Nasdaq: ENER) long-term potential success, given increased activity in solar power projects. The company also achieved profitability in the reported quarter for the first time since it went public in 1969.

Any caveats regarding a stock like ENER?

The company is developing and expanding its solar business while exiting other non-core businesses. Nevertheless, we note the stock's high volatility, pending sale of its Cobasys joint venture, and higher preproduction costs. Additionally, despite increasing product revenue, the internal restructuring processes and several recently announced contracts, we question the profitability potential of licensing royalties.

A history of negative profit margins, operating income and negative historical earnings, including EPS losses until Q2 08, without meaningful valuation metrics, collectively show potential for moderate-to-high returns yet with high risk. Accordingly, we maintain a speculative BUY recommendation on ENER common stock with a six-month target price of $74.00, representing 13.2% upside potential.

What is another company you see benefiting in this space?

The fortunes of SunPower (Nasdaq: SPWR) appear greener given the very high growth potential in the alternative energy industry, and specifically solar power energy, with apparently greater certainty of polysilicon supply through SunPower's new 5-year supply agreement with Jiawei SolarChina. In addition, a new solar cell manufacturing facility in the Philippines and the company s expansion into the Italian market with the acquisition of Solar Solutions adds visibility to the story.

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