Citi cuts Evergreen Solar Target Price 50%

Evergreen Solar (NASDAQ:ESLR) shares rebounded last week but today Citigroup cut their target price and down ESLR shares went 9% and falling this afternoon.

Eric Savitz reports from Barron's -- Evergreen Solar (ESLR) shares are coming under pressure from a cautious note this morning from Citigroup analyst Timothy Arcuri.

Arcuri today sliced his 2009 EPS estimate to a loss of 2 cents a share, from a profit of 3 cents. For 2010, he now sees a profit of 8 cents, down from 42 cents. For 2011, he sees a loss of 42 cents, down from a profit of 21 cents. Arcuri cut his target price on the stock in half, to $1.50, from $3.

Arcuri says that the company is running low on  time and cash. To come up with an appropriate valuation for the company, he takes a “weighted average” methodology.

He figures there is a 60% chance the company “is able to skate along with ample liquidity,” but with curtailed expansion plans. Under that scenario, he figures the stock is worth $3 a share. He uses a 30% weighting valuing the company by total watts of manufacturing capacity using valuations comparable to those for companies like LDK Solar (LDK) and ReneSola (SOL); under that theory, the stock would be worth about 25 cents  a share, he finds. And Arcuri assigned a 10% weighting to a future in which Evergreen’s financial distress leave zero equity value. The blended valuation is $1.67; he rounded to $1.50 to generate his new price target. Arcuri maintains his Hold rating on the shares.

Meanwhile, Arcuri remains cautious on the solar sector overall. “While we can see a significant market opportunity developing in 2011 and beyond, in our view, there remains a demand chasm that must be bridged,” he writes. “With respect to supply, channel inventory has yet to even peak, which should further conspire to keep pricing under significant pressure.”

Five day move for Evergreen Solar shares:

SOURCE: http://blogs.barrons.com/techtraderdaily/2009/03/16/evergreen-solar-citi...