Thursday, May 03, 2007

MEMC (NYSE:WFR): JP Morgan adding WFR to Focus List

JP Morgan is placing Overweight Rated MEMC (NYSE:WFR) on the JPMorgan U.S. Analyst Focus List with a May 08 price target of $75. Although C2Q07 guidance was modestly below street expectations, our C07 ests were unchanged and they believe the post C1Q07 earnings sell-off (down sharply) was grossly overdone and the stock is oversold. Firm believes this is a golden opportunity for investors who are late to the story to take a position heading into the next cyclical upturn.

Given the strong performance of WFR since mid-C06, they believe many investors on the sidelines have lamented missing out on one of the best performers in the SemiCap space. JPM thinks this is the last-best opportunity to get into the stock prior to the seasonal rush of momentum investors starting in C3Q07. They continue to believe that peak QoQ wafer demand growth will be in C3Q07 in preparation for the strong semi demand pull in front of the holiday season.

In C2Q07 they believe both Shin-Etsu and SUMCO signed contracts with the largest YoY polysilicon price increases since prices started rising.

Reiterates OW with a Target Price of $75, which is 23x C07 EPS estimate of $3.25 vs. 20.4x consumables group avg.

Notablecalls: WFR started its bounce already Tuesday morning, so JPM's a tad late with their call. Yet, the $75 tgt and Focus List addition will generate some strong buy interest today and over the next week. I would not be surprised to see WFR hit $60 today, if the overall tape remains firm. On the other hand, if it opens at around $60, I'd be looking for a fade.

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