Wednesday, August 27, 2008

MEMC Elec (NYSE:WFR): Stock should be trading closer to $70 - Merrill Lynch

- Merrill Lynch is out positive on MEMC Elec (NYSE:WFR) this morning noting they expect the co to report that 3Q is progressing as planned and leave guidance unchanged on their mid 3Q conference call, Tuesday September 2 after the close. Management’s guidance is based on 11 weeks of polysilicon production in a 13 week quarter, allowing room for unexpected manufacturing interruptions, keeping the firm comfortable with their estimates. However, Investors are concerned that execution risk remains, if the firm is correct in their view that 3Q has run smooth so far, they believe the call will be a catalyst to reinforce their view that the stock should be valued in-line with peers for a 14x P/E on 2009 to reach their $70 price target.

Inventories have been at historically low levels of 12 days during1H08, leading to additional execution concerns. If manufacturing is running smoothly, the firm believes the company could rebuild some silane and polysilicon inventory in the current quarter to handle any unanticipated production issues down the road.

Maintains Buy and $70 tgt on WFR.

Notablecalls: We had couple of tier 2 firms out positive on WFR yesterday but the stock did very little for the bulls. I think MLCO's comments may ignite it to the upside here.

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