DESC - update
From Yahoo, here's an excerpt from American Technology Research's upgrade on Tuesday, Jan. 3rd:
finance.messages.yahoo.com
We initiated coverage of Distributed Energy Systems with a Hold rating based on
the fact that we believed that the company's good prospects were already priced
into the stock. Now that the stock has pulled back, we are upgrading to a Buy and
recommend that investors add DESC to their energy technology portfolios. DESC
offers a unique investment opportunity, providing exposure to multiple markets
including distributed generation project development, renewable technologies, and
hydrogen generation equipment. While profitability is probably still two years away,
the company is growing rapidly and margins are steadily expanding.
We see three key reasons to own DESC:
1. Diversified Play. One of the key advantages for DESC is that it provides a
diversified play on the distributed generation market. By combining Northern's
services business with Proton's product business, management has provided
leverage to multiple energy technologies in both upstream and downstream
markets.
2. Hydrogen production market. The company believes that Proton's target
markets (materials processing, power plant generator cooling and
semiconductor manufacturing) provide $2B in market opportunity. While we are
not ready to endorse that number, we think there is clearly a sizable market
opportunity.
3. Revenue Growth and Margin Expansion. We expect investors will benefit
from both revenue growth and margin expansion at DESC over the next few
years.
FROM PRIOR POST at 12/23/2005 7:45:14 PM
DESC upgraded to BUY from HOLD...
Price Target $10.50--Amtech/JCA Research.... from Briefing.com
Here's a recap of the coverage to date
Sept. 8, 2005-First Albany intiated a BUY
Oct.25, 2005-Adam Harkness iniated a BUY
Nov.10, 2005-Merriman, Curhan Ford iniated a BUY.
Nov.14,2005-AmTech/JCA Research iniated a Hold
January 03,2006- AmTech Upgrades DESC to a BUY
with a $10.50 Price Target...
FROM PRIOR POST at 12/23/2005 7:45:14 PM
DESC - update
While it was a nice theory (see below), I was wrong. I checked with one of my sources this week. I learned that the total number of shares from this transaction to all was only in the neighborhood of 70,000 shares. So, even if all 70,000 shares were dumped, it would not have had much of an impact. The stock was had very nice volume this week. My source said that the sell-off to below $7.00/sh may have been driven by mutual funds looking to lock in their gains before EOY. This might make some sense. In any event, as I expected, the stock rebounded nicely on excellent volume.
Indeed, we'll see how this plays out, but right now I think this one has the best risk/reward than even TSCM which has had a great run. The biggest reason I feel so is the last conf call in which mgt was very confident of far east contracts. Second, the fact that they did not do a Secondary like ESLR, which they would have had every right to do after the stock helf over $10. I got to believe that they will turn profitable sometime in '06 otherwise a Secondary at a higher share price would have been a no-brainer. Thus, if this is in fact the case, a $15-$20 share price is reasonable. Third, insider selling stopped.
From Post on 12/21/2005 5:05:45 PM
As you know, DESC sold off hard the last week or so. Today, we may have learned the reason for the recent sell-off albeit courtesy of a Form 4 filed today for Director Robert W. Shaw in which he reported acquiring a total of 4,304 shares. This may be very important for several reasons. First, Mr. Shaw already owned approx. 475,000 shares before this transaction. Second, he didn't sell them. Third, take a close look at the quoted language from the footnote in the Form below.
"Shares received from Micro-Generation Technology Fund, LLC (3,155) and Arete Venture Investors II, LP (1,149) as part of a distribution to their members of DESC common stock released from escrow. Shares were held in escrow as part of the Northern Power Systems acquisition agreement. Reporting person is President of Arete Corp. Micro-Generation Technology Fund, LLC and Arete Venture Investors II, LP are managed by Arete Corp."
In terms of the relationship to the recent sell-off, obviously, the key is the date of the release from escrow. This Form was not reported until today; however, the transaction date was December 19, which means that, at a minimum, some shares were released on that date. I suspect that other "parties" received their distribution at or around the same time.
This looks like this maybe the ol' "lock-up" trick as in indirect stakeholders ho received this distribution of DESC shares, which they didn't pay a dime for, and are happy to unload at any price. |
