Gross Margins At MEMC Electronic Materials (WFR) To Be Affected For At Least Five Years
Analysts at Wunderlich Securities initiate coverage of MEMC Electronic Materials Inc (NYSE: WFR) with a "hold" rating. The target price for WFR is set to $15.
According to Wunderlich Securities, “WFR operates in semiconductor materials, solar materials, and solar energy development segments. These segments are under pricing pressure from too much competition and lack of commercial credit, or, in the case of the legacy semiconductor industry, are growing at an increasingly slow rate. MEMC's response has been to vertically integrate up the segment with the better growth profile (solar); this should add to near-term revenue.”
"The world is oversupplied with semiconductor and solar raw material by more than a factor of 200%,” the analysts say. “The silicon makers of the world all added capacity at the same time; thus, what was a small oversupply in 2008 of 18% spiked to 143% in 2009. Because of this, we expect gross margins to be negatively impacted for at least five years or whenever supply and demand come into balance. It would take another Y2K-sized event to alter the picture,” the analysts add.
