Click chart to enlarge After the bell today, LDK warned investors that it will post a loss for Q4 2008 when it reports earnings on March 11th. This will be the company's first quarterly loss. The loss comes amidst lower demand and falling prices... a lethal combination for any company.
We may be way off base here, but our guess is that the stock will stay in the single digits for all of 2009, and may even fall below $5 at some point. If the company survives this recession/depression, its stock will not show signs of life for at least another year. Bottom line... you should not look at tomorrow morning's gap down as a buying opportunity. For at least the next 12 months, your money will be better off under a mattress than in LDK.
We once owned and supported LDK, but jumped ship when the stock broke down from its uptrend on 10-03-2007 when an insider leaked rumors of an accounting/inventory scandal. At that point, we decided that Chinese business antics, although entertaining, were not something we wanted to expose our capital to.
Long story short, we'd seen similar tragic companies in the past, and tried desperately to warn investors that the company was a rotten apple, but found that for some unexplained reason, it had developed a cult-like following. Its investors did not approve of our warnings, which eventually led to us starting this blog. We continue to dislike LDK primarily because its CEO holds almost all of its outstanding shares. Now that we're in an economy where people are struggling to buy milk, plans to put solar panels on their roofs have been shelved. Meanwhile, oil prices have plummeted and now they've forgotten they wanted solar and yada yada, you get the idea.
10 comments:
Isn't lower demand and falling prices always go together? This is more lethal compare to what?
Suntech, LDK, YGE, and CSIQ have gotten together and proposed to the government that they aim to lower the price to $1/kw, down from $2.7/kw or so by 2012. That would be very competitive with coal.
An
Lower demand and lower prices don't always go hand in hand. Demand for cars is way down, but they can't lower the prices on them. They just cut the work force and shut down factories. Supply shrinks to be commensurate with decreased demand, but prices remain the same.
The one-two punch of waning demand and falling prices works like this:
If demand drops by 50% and prices drop by 50%, then the company sells half the products at half price, yielding only 25% of their original revenue. It's devastating for a company. Our guess is that LDK investors are going to underestimate today's warning and not take the stock low enough right away. Instead, it will slowly deteriorate until it settles in at around $5.
Two interesting links:
First, the newest Wall Street scam artist, Stanford, is missing. The article suggests that his scam could grow to be similar in size to Madoff's.
http://abcnews.go.com/Blotter/WallStreet/story?id=6903014&page=1
Second, this is just a must-see video clip.
http://www.youtube.com/watch?v=FqcgjSmcpxs
snot: finding your posts & advice and ultimately the creation of this blog are about the only positives i took away from my ldk experience!
i only wish i would have listened more closely and analyzed more diligently as i could have saved a boatload of money. oh well, at least i'm not still riding the ldk sinking ship.
rl
Thanks, rl. Too bad you aren't short! It's down $1.35 now to $7.65... it doesn't look good going forward. Peng had $5.5B at the stock's highs. Now his shares are worth $500M, so don't feel so bad! That number could easily change to under $100M very quickly. Considering everything he has is invested in that firm, he will no longer be the second wealthiest man in China, to say the least.
Snot, where is the bottom in this market and how will we know it when we see it? How do we know when any rallies aren't bear rallies that will fold in a week or less.
Sam
ldk -25% today. wow, it's like watching a train wreck as it happens.
rl
The only thing that will turn around solars is Ben firing up his helicopter. Keep an eye on Ben and his threat to buy the long bond. If he does, then the whole energy/commodity sector goes boom! Oil will be heading for $200 and LDK will ride it to the moon.
35 minutes till market closes and the DOW is just 14 points away from its 52 week low! It is inching closer, but hasnt broken yet. And op-ex is tomorrow. If you like to gamble, now is the time! LDK could gain even more than the 3X-ETFs. But if the DOW breaks down, LDK could be heading to $5.
Hope you have your popcorn ready.
Snot,
Why would a fix price/lower demand better than lower price/lower demand? Note that auto industries are getting an extremely hard hit. If it weren't for the government bail out, GM would be bankrupt by now.
If you look at gas price, commodities, clothing, and tones of other goods, lower demand = lower price. Health and food are really the only two that cannot be altered too much in terms of decrease prices. I still don't see the case you're making. It seems to me goods that cannot be lowered in price will have problem being competitive and likely suffer the greatest, not the ones that is a bit more flexible.
Falling price eventually can trigger more buying. LDK's main objective is lower cost to make solar feasible for the massive. The fact is, both from national security and environmental point of views, alternative energy is inevitable.
Your focus on chart reading is so short term I don't think you can predict the future because long terms projection depends on other determinants.
An
Snot I am still waiting for Apple to be 14 cents as per your prediction. When do you think I can buy apple for 14 cents?
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