Revenue and earnings going down from where they were is not an issue. Hell, pick your own earnings. How about 20 cents next qtr and $1 for 2009. With $1.4B in cash now what do you think value of this company is?
20 cents in eps for 1Q is unlikely based on their 1Q09 guidance. $1 for 2009 is also unlikely at this point in time, although, I could change my opinion about this based on how things develop in coming months.
I am answering a lot of your questions, why don't you tell us, what should be the value of this company based on your eps, cash on book, RoI assumptions? Just over the last 2 weeks or so, WFR's market cap has come down from over 4B to less than 2.5B (approx) in after hours today and yet you act as if nothing has happened! One could have easily lost 40% in just a couple of weeks!
At $11 WFR has market cap of 2.5B, That means you get $225M ($1) in earnings in 2009 for $1.1B investment. Can you or Pam or GONE understand that this is not a sustainable situation?
First of all, you are assuming that $1 in eps for 2009 is a sure thing. I am not so sure about it. My expectations for WFR has been that it will bottom out in single digits. That hasn't happened yet but it came awfully close. Obviously, it will not stay there for ever, but it is way too early to say it will go up significantly from its current price.
Only way this can happen is if solar business goes away. By goes away I do not mean $50 price on Poly, even at $50 WFR would make 70MM per qtr just from Poly.
Solar business is not going away but a huge haircut in GMs is here to stay for much longer than you think! How did you arrive at $70MM/per Q from just poly? From what I understand, raw poly is just 10% of their revs, the rest of poly goes into wafers production for semiconductor and solar industries. One problem that you have to understand is that when WFR signed contracts with their solar customers, the price of poly built into prices of wafers they agreed upon was high and hence WFRs margins have been high! Now, poly prices are collapsing and there is no way out but to reset the pricing of finished wafers they supply to their solar customers! Wafers for semiconductor market are probably losing money in the current environment and this may not change until late this year. |
