[Hot Off the Press] Alternate-Energy Succumbs to Profit-Taking
Wednesday February 1, 2:20 pm ET
Alternative Energy Stocks Tumble As Traders Take Profits After Run-Up to President Bush's Speech
NEW YORK (AP) -- Traders cashed out of alternative energy stocks on Wednesday -- a day after shares surged in expectation that President Bush would outline a heavy-spending plan in his State of the Union address.
ADVERTISEMENT
Bush gave investors what they wanted, promising a 22 percent increase in research funding for cleaner energies.
In his address Tuesday night, Bush introduced an "Advanced Energy Initiative." The program calls for $289 million in additional financing for hydrogen fuel, $281 million for clean coal technologies, $150 million for cellulose-based ethanol and $148 million for solar energy in the fiscal 2007 budget. The plan also earmarks a smaller amount for wind energy research and advanced automotive batteries.
"It's a little bit of 'buy on the rumor, sell on the news,'" said John Quealy, an analyst with investment bank Canaccord Adams. "Trading-oriented folks are taking profits."
Although Quealy advocates investors have some exposure to alternative energy stocks based on the industry's growth prospects, he cautions against the risks. Many of the companies are young and unprofitable with stocks that tend toward volatility, he said.
A nascent company called Pacific Ethanol Inc. is somewhat emblematic of the sector.
Shares of Pacific Ethanol slid $2.44, or 12.9 percent, to $16.39 in afternoon trading on the Nasdaq, a day after the stock climbed to a 52-week high of $19.14. Trading volume surged to 3.3 million versus a daily average of about 337,000.
Pacific Ethanol doesn't produce ethanol yet, however the company has plans to construct five corn-based ethanol production plants by 2008. Chief Executive Neil Koehler said he expects the company's ethanol business to turn its first profit in the fourth quarter of 2006, when the first plant is scheduled to start operations.
When the five plants are running, Pacific Ethanol will have the capacity to churn out 200 million gallons of ethanol per year. The market currently produces some 4 billion gallons annually.
"The ethanol business is a very profitable business today, and we expect to see good margins with the initiation of our ethanol production," Koehler said.
Pacific Ethanol shares are up 51.5 percent since Jan. 1.
Elsewhere, Archer Daniels Midland Co., an oilseeds processor that has been ramping up its ethanol production, saw its shares shed $1.09, or 3.5 percent, to $30.41. The stock reached a fresh 52-week peak of $32.22 on Tuesday.
The proposed government investment doesn't amount to much when scaled against the billions the government spends elsewhere. However, relative to what has been spent in the past, the funding is promising, Quealy said.
While $150 million is a drop in bucket for the government, "$150M focused specifically on solar materials is quite large," he said. "There was a little bit of investor anticipation and letdown in terms of magnitude of dollars. But take a step back, and it still is very positive."
In the solar sector, shares of Evergreen Solar Inc. dropped 43 cents, or 2.8 percent, to $15.00; shares of Sunpower Corp. fell 35 cents to $39.65 and shares of Energy Conversion Devices Inc. slipped 36 cents to $50 on the Nasdaq. All three stocks had climbed sharply over the past few days, with Evergreen and Sunpower hitting 52-week highs on Tuesday.
In the hydrogen fuel cell sector, shares Quantum Fuel Systems Technologies Worldwide Inc. fell 29 cents, or 5.8 percent, to $4.71 on the Nasdaq
biz.yahoo.com |
