Ok my targets of $46-$47 are now here. I am now adding 400 more shares in the upper $46s to mid $47s, taking LDK Solar (LDK) up to a 3.9% position. From here I will monitor the last 40 minutes of the day. I would think $46 would provide a good floor but with panicked investors they could overshoot to the downside (could happen tomorrow morning or in last 5 minutes as people cannot take the pain anymore). Could it overshoot even more and go to $40 tomorrow? Perhaps - no crystal ball here. But this would start to become a function of panic and nothing to do with the stock or company at that point....
My original thought mid day was LDK Solar (LDK) would gap down tomorrow to reach these mid $40s price points but we got it all in 1 day. Can't complain. I wrote yesterday:
I will be hoping for a pullback to some key gap levels such as $60 before adding any to my small position. (There is a nice gap down south of $46 which would be even more tasty)
So I am getting the tasty level all in 1 day. Quite amazing to watch this meltdown, but always have a battle plan going into every trade and it won't seem so bewildering. The gaps in the charts both got filled, shorts are engorged and happy, longs bewildered, and I just got a new number 1 position in the fund.
Long LDK Solar in fund and in personal account
Thursday, December 20, 2007
Bookkeeping: LDK Solar (LDK) Hits Targets
Posted by
TraderMark
at
3:18 PM
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2 comments:
Re: LDK. Goldman placed it on the Conviction SELL list, and Piper downgraded it to Sell with a ~34 price target. What are you seeing that they aren't? Can you rehash a little bit on why you think its such a good buy here while analysts are so negative on it?
Piper: Downgrade details (66.11 ) -Update : Piper downgraded LDK to Sell from Neutral and maintains their $34.50 tgt following earnings. Firm says that uncertainties still exist with respect to LDK's low turns of 2.2x, unsubstantiated contract supply with 25% exposure to spot, high risk polysilicon ramp with targets they assess as overly aggressive, and numerous shareholder law suits.
Goldman: Goldman Sachs analyst Cheryl Tang added the stock to her Conviction Sell List, and held a price target of $33 per share.
If I listened to analysts over the years I'd of dropped out of the market years ago. These are people downgrading the financials in the past 2-3 weeks.
Simple case for LDK - its an arms supplier to the PV panel makers. Gross margns will probably end up in 25-27% range in near term, on a large revenue ramp and we have (a) accounting issue if not resolved put to bed (for now) (b) new guidance (c) another quarter in the bag (d) a better idea of the year ahead (e) Qcells one of the most influential companies in the industry is now in bed with LDK
ASPs should decline in 2008 for the PV makers but they will still need wafers. Just like they will need JASO for cells. It's not going away.
LDK at $70 probably did not discount 30% or below margins. I was having a hard time getting on board they would keep those margins myself, but now we have a more reasonable assumption of 25-30%. I expect that to be the range next 6 quarters and then it will uptick once they get the plant going. Although people say plant will be ready by end of 2008 I wont count on it until mid 2009. So until then you have a labor intensive industry with polysilicon prices higher than usual for next quarter in the spot market but 75% of supply for 2008 secured, and a new paradigm of 25-30% gross margins in a sector with unquenched demand. I can live with that in the $40s and $50s. I expect about $1.50 EPS in 2008 as the worst case, and if polysili prices fall in 2nd half of 2008, there should be good upside from there.
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