Crush Depth Alert in American Superconductor (AMSC)

American Superconductor Corporation (NASDAQ: AMSC) is hardly looking super and hardly looking American after the close of trading this Tuesday.  The company gave a guidance update due to a key customer order refusal and shares are getting crushed in the after-hours session.

The company announced that Sinovel Wind Group Co., Ltd. refused to accept an order delivery for core electronic components for wind turbines.  The order refusal came on March 31 from the Chinese wind power company.  American Superconductor said that it believes Sinovel is planning to cut down on inventories before it accepts any new parts shipments.

This order delay is called the primary reason for the shortfall and the company now sees fourth quarter sales of less than $42 million and that it will generate a net loss for the fourth quarter. As a result, AMSC currently expects its full year fiscal 2010 revenues to be less than $355 million. The prior guidance was for $430 million to $440 million for the year. 

Another hit will be to its cash as it was at $260.5 million on December 31, 2010 and the new cash and equivalents figure will be closer to $240 million.  As a result of the deliveries being refused, the company is now dealing with a review on the timing of its revenue recognition on approximately $56 million of unpaid shipments in the second, third and fourth quarters of fiscal 2010.

While the company is discussing when Sinovel plans to take future deliveries, it is also discussing when Sinovel will pay for past shipments. American Superconductor said it is now “implementing plans to better align spending with near-term revenues while continuing to maintain a high level of service and support for its global Wind and Grid customers.”  In short, it was caught unexpectedly with what brokers would call a “DK” trade and now it is slashing costs near-term.

What is sad about this besides the drop is that this company is supposed to be one of the wind energy winners and alternative energy winners out there.  It just seems as though the move to alternative energy is still petering out as governments tighten the belt and as customers are growing cautious on large capital projects.  We knew that wind was facing some of the same issues that solar and other alternative energy players were facing, but this is crushing what was already a weak stock. 

American Superconductor shares closed up 0.8% at $24.88 against a 52-week trading range of $21.70 to $38.88, but the after-hours trading is severely punishing the stock.  Go ahead and expect a 52-week low and then some as this one is down about 44% at $13.60 after the close.

Wednesday is going to be a rough day and it is safe to assume that other alternative energy players who have large Chinese customers might feel the pinch as well.

JON C. OGG