Evergreen Solar Shows Upside Potential Despite Near-Term Risks

Evergreen Solar (ESLR) engages in the development, manufacturing and marketing of solar power products worldwide, including solar cells, panels and photovoltaic systems. Its modules are designed for a range of solar electric power applications, including water pumping, communications, outdoor lighting, rural electrification, recreational vehicles and stand-alone or grid-connected AC applications.

The growth potential of the solar industry as a whole, and Evergreen Solar in particular — with a $3 billion and 1GW [gigawatt] contractual backlog — remains a compelling story. Capacity expansion and progress toward near-term break-even earnings make it one of the fastest growing alternative energy stocks. Positive factors include the significant new multi-year sales contracts, ongoing expansion programs over the next few years, improving operating efficiencies, technological upgrades and planned new string factory.

However, continuing earnings losses due to high start-up costs, significant capital expenditures and earnings dilutive stock issuances may present risks to near-term share price upside potential. Nevertheless, we maintain our BUY recommendation on Evergreen Solar with a six-month target price of $5.00. Price appreciation to our near-term valuation target represents 29.2% upside potential.

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