Wednesday, October 21, 2009
Tuesday, October 6, 2009
Gold Stocks Are Never Looked Better Before
Take what market offers you, not making predictions what market will do next. Right now, the market says GOLD is breaking out of a 19 months range and many gold stocks are showing favorable chart patterns.
The chart says "Take Them"
The chart says "Take Them"
Saturday, October 3, 2009
A123, Is the Battery More Hype than Hope?
Cleaning Up: Is A123 System’s Explosive Stock-Market Debut The Real Deal?
By Keith Johnson
To judge by the buzz surrounding the initial public offer of battery maker A123 Systems, investors are ready for a ride. A123, which has never turned a profit, just upped both the size and the price of its stock-market listing to almost $400 million. Its shares were priced at $13.50 apiece for the IPO; they jumped to $19.70 in early trading today.
Is this the beginning of the green tech revolution or a reprise of the tech bubble?
Let’s take a look under the hood, as it were. A123, based in Cambridge, Mass., makes batteries that power hybrid and electric cars, among other things. The market for electric cars could be potentially huge, since the U.S. and other big economies want to wean themselves off oil and curb greenhouse-gas emissions.
How huge is anybody’s guess. Actually, it’s A. T. Kearney’s guess—A123 used to use market forecasts from Lux Research, but those were fairly conservative. So since this summer, A123 has been relying on Kearney forecasts of the market for lithium-ion batteries for electric cars: $32 million today, but poised to grow to $21.8 billion in 2015 and $74 billion in 2020.
That might very well be the case. Or it may not—as A123 points out in its prospectus, the world is a fickle place. Oil and gas prices might get cheap and stay there, eroding demand for electric cars. Political will—so important to support the not-yet-cost-competitive electric-car market—could evaporate. Somebody else might invent the next big thing. And so forth.
Actually, as A123 notes, its real fears are more pedestrian. It does a lot of manufacturing in China, where intellectual-property laws are lax. Its rivals are better-funded, and have deeper relationships with carmakers that plan to use the batteries. Staying competitive on costs will be a challenge, especially since China has jumped into the battery business with both feet.
Still, A123 has already landed funding from the federal government’s plan to jumpstart U.S. battery production, a huge vote of confidence. And the company also has its eye on another market: Batteries can be used to store electricity from renewable energy, and countries around the world are already scrambling to add more wind and solar power.
But for investors who remember the dot-com boom, there is one potentially troubling part of A123’s pricey public offering: The company’s proven track record of spending more than it makes. In the first half of 2009, A123 had sales of $43 million and a net loss of $41 million. That followed last year’s net loss of $80.4 million on sales of $68.5 million.
That’s because the company is still spending more to develop the next world-beating battery than it’s making by selling them. Total costs were 1.45 times sales in 2006; 1.78 times sales in 2007; 2.16 times sales in 2008, and 1.93 times sales so far this year. Simply getting bigger won’t solve that.
Investors appear eager to get in on the coming clean-tech revolution; LED-maker Cree had a field day last week with a secondary offering. Time will tell if A123 is the best vehicle to get there
By Keith Johnson
To judge by the buzz surrounding the initial public offer of battery maker A123 Systems, investors are ready for a ride. A123, which has never turned a profit, just upped both the size and the price of its stock-market listing to almost $400 million. Its shares were priced at $13.50 apiece for the IPO; they jumped to $19.70 in early trading today.
Is this the beginning of the green tech revolution or a reprise of the tech bubble?
Let’s take a look under the hood, as it were. A123, based in Cambridge, Mass., makes batteries that power hybrid and electric cars, among other things. The market for electric cars could be potentially huge, since the U.S. and other big economies want to wean themselves off oil and curb greenhouse-gas emissions.
How huge is anybody’s guess. Actually, it’s A. T. Kearney’s guess—A123 used to use market forecasts from Lux Research, but those were fairly conservative. So since this summer, A123 has been relying on Kearney forecasts of the market for lithium-ion batteries for electric cars: $32 million today, but poised to grow to $21.8 billion in 2015 and $74 billion in 2020.
That might very well be the case. Or it may not—as A123 points out in its prospectus, the world is a fickle place. Oil and gas prices might get cheap and stay there, eroding demand for electric cars. Political will—so important to support the not-yet-cost-competitive electric-car market—could evaporate. Somebody else might invent the next big thing. And so forth.
Actually, as A123 notes, its real fears are more pedestrian. It does a lot of manufacturing in China, where intellectual-property laws are lax. Its rivals are better-funded, and have deeper relationships with carmakers that plan to use the batteries. Staying competitive on costs will be a challenge, especially since China has jumped into the battery business with both feet.
Still, A123 has already landed funding from the federal government’s plan to jumpstart U.S. battery production, a huge vote of confidence. And the company also has its eye on another market: Batteries can be used to store electricity from renewable energy, and countries around the world are already scrambling to add more wind and solar power.
But for investors who remember the dot-com boom, there is one potentially troubling part of A123’s pricey public offering: The company’s proven track record of spending more than it makes. In the first half of 2009, A123 had sales of $43 million and a net loss of $41 million. That followed last year’s net loss of $80.4 million on sales of $68.5 million.
That’s because the company is still spending more to develop the next world-beating battery than it’s making by selling them. Total costs were 1.45 times sales in 2006; 1.78 times sales in 2007; 2.16 times sales in 2008, and 1.93 times sales so far this year. Simply getting bigger won’t solve that.
Investors appear eager to get in on the coming clean-tech revolution; LED-maker Cree had a field day last week with a secondary offering. Time will tell if A123 is the best vehicle to get there
Thursday, October 1, 2009
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