Greentech insiders had plenty to ponder this week as earnings came in, stocks rose and fell and venture-capital funding kept streaming into the industry.
A few of the news items highlighted questions and trends to keep an eye on, including Itron missing earnings expectations, LDK Solar shares steadying despite bad news, more carbon sequestration projects and solar stocks rising -- then falling again.
Here's our read for the week:
Itron (NSDQ: ITRI), which makes smart meters and meter-reading systems, missed expectations Thursday when it posted a third-quarter net income of $21 million, or 65 cents per share, excluding some debt payments and one-time expenses (see In Brief: Itron Misses Expectations).
Those numbers grew from $15 million, or 56 cents per share, in the year-ago quarter. But analysts had expected 77 cents per share (see Good News Expected for Energy Management).
And including one-time expenses and debt payments, Itron netted a loss of $3.4 million, or 11 cents per share, compared with a net income of $9.2 million, or 32 cents per share, in the third quarter of 2006.
Shares plunged 25.5 percent to $80.07 per share at the close of trading Friday from $107.49 per share Wednesday on the news.
John Quealy, an analyst with Canaccord Adams, whose firm has previously done business with Itron, said the company's U.S. business was slower than expected and that margins fell due to the company's April acquisition of Actaris.
The company said its gross margin fell to 33 percent in the third quarter, compared to 41 percent for the same quarter last year -- mainly due to margins outside of North America.
That's because Luxemburg-based Actaris, which sells products and services for electricity, gas and water metering, primarily outside of North America, is in a lower-margin business compared with the rest of Itron, Quealy said. But the acquisition makes sense because it could potentially expand Itron's high-margin business into a larger area, he said.
The lesson from Itron is that utilities can take longer than expected to make purchasing decisions, he said.
"While Itron should be well-poised in coming quarters, in the near-term, they are dealing with some client-evaluation time cycles," he said. "Utilities are making deliberate plans to spend on demand response -- and they plan to spend a lot -- but these plans can take some time. … Expectations just need to be realistic on how fast utilities move."
Still, Quealy said his long-term outlook for energy management is "as healthy as ever." Two utilities, Constellation Energy and CenterPoint Energy, both mentioned smart-metering initiatives in their earnings calls this week, he said.
"There's a lot of activity," he said. "There was a big move for the stock today, but the long-term opportunity is positive."
LDK Solar Investors Stand By the Stock
LDK Solar hasn't had it easy in the past month as it continues to face allegations of discrepancies in its silicon inventory (see LDK Says Inventory Discrepancy Allegations Have 'No Merit', New Details Surface as LDK's Stock Continues to Plunge, LDK Says Employee Made Allegations Before Termination).
This week didn't seem to get any better, with an announcement that the U.S. Securities and Exchange Commission was inquiring into the allegations and Piper Jaffray analyst Jesse Pichel downgrading the stock from Outperform to Market Perform (see LDK Says SEC is Inquiring Into Inventory Discrepacy Allegations).
But shares have remained steady this week, closing at $39.55 per share Friday, up 4.4 percent from a close of $37.89 per share a week ago.
Pichel, who first broke the story of the allegations in a report in early October, said he downgraded because of a concern that scrap silicon costs will rise, increasing LDK's costs for solar-grade silicon.
Low costs from scrap polysilicon had been the source of LDK's advantage, he said.
But almost all of the companies making wafers for the semiconductor market, which is the main supplier of scrap silicon for the solar industry, have announced they are entering the solar wafering business themselves, he said.
MEMC are two examples, he said, and IBM this week announced it also was getting into the silicon-recycling business.
Because of that competition, he said, costs are "going through the roof" and LDK's costs are "not sustainable."
Pichel also said the delay in cleaning up its accounting issues and disclosing its independent inventory report means the stock is "going nowhere" for a while.
And because of the fallen stock, the company might have difficulty raising the money needed for a planned expansion of its wafer manufacturing capacity to 400 megawatts per year, estimated at $300 million, he wrote in a research note.
In addition, the company didn't announce third-quarter earnings Thursday, which would have been three months after it posted second-quarter earnings and the same time period -- 32 days -- after the quarter ended. (The company has 45 days after the end of the quarter to file.)
The company has increased its guidance for the quarter, making it an eagerly anticipated event for downtrodden investors (see LDK Ups Its 3Q Guidance).
But investors still holding the stock after shares plunged from a September peak of $76.75 per share aren't in a hurry to drop LDK now.
This loyalty might indicate that investors have become more forgiving, or that they believe the plummet was too far a drop to be justified by the inventory issue.
Solar Has a Roller-Coaster Week
Solar stocks were up 10 percent Monday as oil prices hit another record of $93.53 per barrel and continued to grow, breaching $96 per barrel Thursday.
SunPower shares (NSDQ: SPWR), for example, closed at $126.46 per share Wednesday, growing 6.8 percent from an opening price of $118.42 per share Monday.
Then solar stocks turned downward Friday after a story in the Frankfurter Rundschau that Germany might cap its solar energy subsidies.
German-based Ersol shares fell €4.03 to €89.02 on the Frankfurt exchange, for example.
The takeaway here is that solar stocks still are subject to risk from oil prices and from policy, in a big way -- even though solar power competes with conventional electricity, not oil.
VCs Still Love Greentech
Funding news was as abundant as ever this week, led by the news that Project Better Place had scored a cool $200 million for a plan to lease batteries for electric cars and operate charging and exchange stations across the United States (see Startup Snags $200M Electric-Vehicle Battery Leasing Program).
Not bad considering electric cars still make up a miniscule part of traffic today, and drivers only replace their cars every six years or so (see Tesla Suspends Battery-Pack Business).
Then, Serious Materials closed $50 million for its energy-efficient drywall process, Atraverda raised $21.5 million for its battery materials, Optimal Technologies raised $10 million for its energy-management technology, ImageTree raised $4.5 million for its forestry-management technology and KiOR raised an undisclosed amount for catalysts to break down cellulosic material for biofuels.
All the activity is evidence that investment in greentech is showing no sign of a slowdown. According to the Cleantech Venture Network, which monitors venture-capital investments in cleantech, the third quarter reached an all-time high of $1.74 billion in North America and Europe.
Greentech investment numbers vary widely. On Saturday, Dow Jones VentureOne and Ernst & Young released figures showing U.S. energy and advanced-materials investments totaled $867 million, with only part of that coming from cleantech (see In Brief: VCs Keep Bringing the Green to Greentech).