GT Solar Swoons; Piper Turns Bearish, Sees Backlog At Risk

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GT Solar (SOLR) shares are down sharply this morning after Piper Jaffray analyst Jesse Pichel this morning cut his rating on the shares to Underweight from Neutral, with a new price target of $3, from $7. The stock closed yesterday at $5.54. Pichel’s move comes one day after the company posted FY Q2 results that were about in line with the company’s recent pre-announcement.

Pichel writes that he has “major cocnerns” on the company’s backlog of polysilicon manufacturing equipment orders; he says the backlog total is at risk due to the “rapidly deteriorating” financial conditions of some of its customers in China as the government there “clamps down on new poly entrants in an effort to rationalize capacity.” He thinks that many poly start-ups in China could shut down, and that “it will be difficult for SOLR to get new bookings or realize its contracted backlog.”

Moreover, he thinks there are risks that even current customers with orders now in backlog could cancel. He thinks the portion of backlog at risk is much higher than the 20% indicated by management. He notes in particular that LDK Solar (LDK), historically the company’s largest customer, “is on a financial precipice and…unlikely to remain a customer.”

With book value of just 73 cents a share, he cautions that downside is higher than upside near term.

SOLR today is down 72 cents, or 13%, to $4.82.