Evergreen Solar Slides; Citi Cuts Rating To Sell

Evergreen Solar (ESLR) shares are down sharply this morning, pressured by downgrades from both Citigroup analyst Timothy Arcuri and Pacific Crest analyst Mark Bachman.

• Arcuri cut his rating to Sell from Hold, with a new target of $1, down from $3. “Customers like the product, but ESLR remains in a liquidity struggle that is  forcing it toward what should have been done from the get-go, focusing on its competitive advantage, making wafers,” he writes. “Near-term, gross margins turns negative again” until it finishes transitioning manufacturing to China, he adds, while cash will stand at at just $50 million by the first half of 2010. Longer-term, he adds, the company’s module cost position won’t be any better than peers. And he says that it could take a few years for the company to make larger wafers that comply with current industry standards; for now, the company is the only taker for the wafers.


• Bachman cuts his rating to Sector Perform from Outperform. “Given the near-term challenges ahead, we no longer have the conviction to recommend putting new money into the stock,” he writes. “We have modeled for further declines in average selling prices,”  as well as under-utilization of the company’s facility in Devens, Massachusetts, ramping expenses from China and continued losses from the company’s investment in Sovello, “all of which weigh on Evergreen’s financial outlook over the near term.” He added that “although management outlined a positive cash position through 2010, it remains possible that Evergreen may need to return to the capital markets late next year and either increase its debt or add further dilution.”

ESLR today is down 12 cents, or 7.7%, to $1.43.

Previously: Evergreen Solar Revs Top Street View; Sees Slowing Ahead (November 4, 2009)