MSK, What Are We Going to Do With You?

From The Average Joe Investor

One answer to the above question might be: "it doesn’t matter."

On Friday Suntech (NYSE: STP) filed updated Q4 projections, including updates on the integration of its MSK acquisition. The filing breaks down pretty simply: Suntech is doing quite well, while MSK is still lagging. In the filing, Suntech upped its Q4 top-line expectations for the core business from a range of $166m to $170m to a range of $188m to $192m. Revenue guidance for MSK, meanwhile, was cut in half from the original range of $60m to $64m to a new range of $30m to $32m. Suntech also gave Q1 ’07 guidance of $220m to $228m, which is roughly flat sequentially due to the fact that they’re waiting for new capacity to come online.

My takeaway from the press release when I first read it was that it’s too bad that MSK isn’t living up to its billing so far, but I can’t be too angry given how well Suntech’s core business did in the quarter. I did, after all, originally invest in Suntech. I think plenty of value will end up being realized from MSK – if nothing else the market foothold in Japan and their BIPV products (basically solar collectors that replace roofing material) are worth something – so I’m willing to be patient.

But lets face it, I’m late to the table on this post about Suntech – the filing was on Friday and the stock is up over 7% today. Luckily I was prodded by a faithful reader over the weekend to say something on the matter! I could pass it off on the fact that I was chillin’ in the Big Easy over the weekend and enjoying the beignets and chicory coffee. But that’s not really the reason that I didn’t rush to post about Suntech.

Over the course of the time that I’ve held the stock (which is since the IPO), I’ve come to see it less like the Evergreen Solars (Nasdaq: ESLR) and Hokus (Nasdaq: HOKU) and more as a steady company that I don’t have to keep a constant eye on. Granted, the world of solar is still new and developing and it’s essential that Suntech keep on top of (profitable!) development in technology, but the company is proving itself to be well managed and able to deliver on its goals. I’m not going to go and say this is a Verizon (NYSE: VZ) or AT&T (NYSE: T) for the "widows and orphans" crowd, but it’s one that I’m going to look to hold on to.

Of course, the report released from the Intergovernmental Panel on Climate Change, which was released on Friday only serves as a further backstop to the projected growth of solar power generation as well as other alternative energy sources. And if you want my best guess, it’s that report, not Suntech’s release on Friday, which is moving the stock today – it’s actually moving pretty much all of the solar names.

-AvgJoe

http://theaveragejoeinvestor.blogspot.com/