Analyst’s Comments Rain on A123’s Parade

Shares of A123 Systems Inc. (NASDAQ: AONE) rose more than 50% yesterday on the company’s announcement of a new battery technology. While there is substantial promise in the new technology, which A123 calls Nanophosphate EXT, at least one analyst is not impressed and his opinion is cutting into yesterday’s gains.

Wunderlich Securities’ analyst Theodore O’Neill has called new battery technologies “a dime a dozen” and points out that even if A123’s technology is as good as the company claims, it will not solve the company’s immediate problems because it often takes years to develop new technology and to get it into mass production:

Years are not what A123 has. Indeed, according to our analysis it will need $400 million more than it’s got to make it through the next 18 months, and even then it would not be enough. We reiterate our ‘Sell’ rating and our 50-cent price target, which would be zero except that we believe the factory has some residual scrap value.

That’s harsh. But remember that the new technology announcement followed by just two weeks A123’s “going concern” letter.

Shares in A123 are down about -15% at about noon today, at $1.36 in a 52-week range of $0.82-$5.91.

Paul Ausick