A.J.: The analyst in question is John Adams of Adams, Harkness, & Hill, a Boston research boutique. I saw his report although I don't have a copy. He didn't downgrade it at all, since it was never a strong buy - he kept it at buy. He actually raised his earnings estimate for the next year a bit, not that that makes any difference. The verbiage was more positive than what was in his previous (to my knowledge) report from last winter.
Actually, I don't care what he says. I can do my own analysis. Like any other development stage company, it remains to be seen whether ERC can deliver on the promise of its fuel cell and battery technology. So at this stage all one can do is price it based on the size of its potential markets, multiplied by the probability (<1.00) of it achieving its objectives, discounted back to the present day.
I see both the batteries and fuel cells as being potential multi-billion dollar markets starting in 2000 and soon thereafter. If ERC hits on both of them it will have a market cap in the billions, and its frugality to date will limit the number of shares outstanding. So if all goes well, in five years or less the stock will be several hundred dollars a share.
Now the chance of that happening is less than 100%, and a dollar five years from now is worth less than one today. But it seems like a price in the $30-50 range might be appropriate now while we are waiting to see if things work out as hoped.
That is a lot more than it is selling for now, so I like the stock a lot. |
