The wind-turbine components maker American Superconductor Corp. fell the most in two decades after its largest customer refused to accept a shipment and its stock was downgraded.
The stock slumped about 42 percent to $14.47 in Nasdaq Stock Market trading today, the biggest intra-day decline since it was listed in 1991. It fell as low as $12.54, down about 50 percent. The Devens, Massachusetts-based company said yesterday that it expected to report a net loss for the fiscal fourth-quarter after Sinovel Wind Group Co. refused to accept contracted shipments.
Sinovel may be shifting its business to another supplier, Jesse Pichel, an equity analyst with Jefferies, said in a research note today.
“Although it is true that AMSC has the exclusive right to provide components for its licensees, there is no exclusive use of their license design,” he said. “An AMSC customer is free to license designs from another vendor and source components from elsewhere. Given Sinovel’s sudden action before the start of its second contract, we cannot discount this possibility.”
“American Superconductor guidance implies inventory correction could last several quarters and has negative implications for wind stocks,” Vishal Shah, an analyst with Barclays Capital, said in a note to clients today. He left the stock’s rating unchanged at ‘equal weight/neutral.’’
Downgrades, Contract Rejection
Downgrades of American Superconductor that followed the statement included Jefferies Group Inc., to “underperform” from “buy,” and Raymond James to “market perform” versus “strong buy.” RW Baird lowered its price target to $11 from $22 with a “neutral” rating and Citigroup cut its target from $25 to $17 while maintaining its “hold” rating.
Sinovel on March 31 declined to accept contracted shipments of core electrical components and spare parts for 1.5-megawatt and 3-megawatt wind turbines, American Superconductor said. The manufacturer said it now expects to report total revenue of less than $42 million for the quarter that ended March 31. That’s lower than the $119.2 million median of 13 analysts surveyed by Bloomberg. It will result in a net loss, the company said.
The company said too that full-year revenue will be less than $355 million compared with its previous forecast of $430 million to $440 million.
Full-year earnings are expected to be “well below” the company’s previous forecasts, the company said.
American Superconductor said Sinovel declined to receive the components to reduce inventories. The Beijing-based manufacturer is its largest customer and generated about 70 percent of its revenue in fiscal 2010.
Negotiations are under way to determine when Sinovel will accept further shipments and when it will pay for previous shipments, AMSC said. In the interim, the company said it is taking steps to reduce spending.
The stock had dropped 13 percent this year through yesterday.