On Monday, LDK Solar (NYSE: LDK) surged 20% to $68.18 on news that an investigation into the company's accounting came up clean, but like Rodney Dangerfield, the stock can't get no respect. Not one but two analysts kept their "Sell" ratings, both concerned with the company's dipping margins.Maybe they're right, but it's funny that these analysts have held onto their bearish positions even as the stock has surged from $30 to $68 in less than a month (shows you what analysts know)! Analysts like their cushy jobs, so they can't go out on a limb and say something like, "Wait a minute, this latest surge really just makes up for the crash that was caused by investigation concerns. Now that that's cleared up, maybe this one's got more in the tank -- especially considering that while LDK was tied down all throughout October, November and the first half of December, other solar plays like First Solar (NASDAQ: FSLR), Evergreen Solar (NASDAQ: ESLR), Suntech Power (NYSE: STP), Sunpower (NASDAQ: SPWR) and Solarfun (NASDAQ: SOLF) have all doubled and more."
I have no cushy job, so I call it like I see it and that's what I think. I know this is a contrarian view, but maybe, just maybe, LDK will now play catch up to the price performance of those other plays. And, yes, I'm also concerned about margins, but these solar plays are not moving based on fundamentals alone, they're moving on momentum -- something analysts can't quantify.
For now, I'm in the minority, and the stock, which has come very far very fast, executed a near perfect double top yesterday morning at $75 (a bearish sign). But there are more than 7 million shares short (as of early November; now it's probably closer to 8 or 9 million shares), so if this stock breaks the previous high of $76.75, those shorts will be forced to buy to cover, and analysts might be forced to respect the breakout and reverse their positions, helping to push the price higher. Let's call this concept trickle up short squeezeonomics. So, it's at $76.75 that I'd buy, not a penny lower.
Timothy Sykes writes the blog timothysykes.com, is a former hedge fund manager, the star of Wall Street Warriors and author of the book, An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund
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Reader Comments (Page 1 of 1)
12-18-2007 @ 11:14AM
BAB said...
ESLR went from 9 to 15 in the time specified. Not a double or more. I didn't check the others, but clearly a sloppy production.
12-18-2007 @ 11:21AM
Tim Sykes said...
Actually, ESLR has gone from $8.82 to $17.75, which by my calculations is a little more than a double. Nice try though!
12-18-2007 @ 11:31AM
bigbet888 said...
I am with you!
Goldman Sachs, Piper Jaffray,Lazard Capital were all "sell, sell, sell" when the stock was 40 and 30. Instead of admitting bad calls, they now saying something else. How can one trust them again when they made such bad calls:-0
UBS and Needham both upgraded the stock before the audit report's release. Congratulations to them!
12-18-2007 @ 12:04PM
MJR said...
These LDK analysts are a piece of work. They raise their Q3 estimates while lowering the price target. Desired result - LDK misses or disappoints (relative to lofty analyst targets) and thus a sell off is engineered, lowering the price. Once they've established a position at a favorable cost, the "sell" becomes a "buy." I plan to watch these jerks closely.
12-18-2007 @ 12:14PM
BAB said...
According to the Nasdaq site, ESLR opened Oct. 1 at $8.95 and, at 10:20 A.M., the time of your posting, was about $15.30. Not double. QED.
12-18-2007 @ 12:39PM
Tim Sykes said...
Are you serious dude? 3 days ago ESLR hit $17.75. A perfect double. Anyway, I think you got my point, so my article was successful. You're probly a bitter short on LDK, right? Hey, don't fret, if you get the gist of my article, I say I'm not bullish until it's a proven breakout--until then, I'm avoiding it...too scary here to short, for me at least
12-18-2007 @ 4:32PM
brad said...
The ER tomorrow will provide the needed catalyst to get over the $75 top. The reason that the top was set at $75 is that it was the highest level previous to the investigation drama. It will trade back up to $75 before the earnings release after the close.
The management clearly understnads that they will have to beat this quarter to restore investor confidence. This is a sentiment driven stock. They will beat, and this stock will instantly start a breakout to make up for lost time and lost gains among other solar stocks (as you noted in your post).
12-18-2007 @ 4:33PM
bradical said...
The ER tomorrow will provide the needed catalyst to get over the $75 top. The reason that the top was set at $75 is that it was the highest level previous to the investigation drama. It will trade back up to $75 before the earnings release after the close.
The management clearly understnads that they will have to beat this quarter to restore investor confidence. This is a sentiment driven stock. They will beat, and this stock will instantly start a breakout to make up for lost time and lost gains among other solar stocks (as you noted in your post).
12-18-2007 @ 4:33PM
BAB said...
The fact that you need to speculate about my being a "bitter short" shows something more about you than about me. Note that your logic allows for the following: October 1 - $5. November 1- - 2.50. December 1 -- 5.00 (Hey, it's a double). And December 18 -- (which I would have thought the relevent date) $1. Now why wouldn't you call that a double? Are you saying this is charter's technical language?
Actually, it was a small (but as it turned out telling) point and I would think one response might have been to say oops, I was a little off, I'll be more careful next time. Instead of being wedded to your position which subverts plain language.
12-18-2007 @ 4:39PM
Tim Sykes said...
Guy, what are you smoking? My point was clearly stated that all the other solar stocks have doubled and more while LDK missed out. Easy. Simple. There was no mistake, I wasn't off at all, it is you who are off.
12-21-2007 @ 2:52PM
Frank Martin said...
Wow its tanking now...
12-21-2007 @ 3:02PM
Tim Sykes said...
Yup, and that's why I made sure to point out that I'd only buy on strength, namely a breakout above $77. That's why no matter what your thoughts are, bullish or bearish, you really must pay attention to key price points -- they really do protect you from blow ups like this
12-27-2007 @ 1:06PM
Bugitout said...
Are you guys married or something???