Market Overview

Goldman Sachs Reiterates Neutral Rating on A123 Systems (AONE)


Goldman Sachs is out with a research report this morning, where it reiterates its Neutral rating on A123 Systems (NASDAQ: AONE); it has a $9.00 price target on the stock.

The GS analysts have revised their earnings estimates lower following the company's Q3 earnings, noting the following key points:

(1) “The company pushed out its expected production ramp from 4Q'10 to 2Q'11 primarily citing delays at its OEM partners.
(2) Production momentum continues, as A123's JV with SAIC remains on track to supply battery packs for a new EV in China in 2012 and the company appears to be making progress with an unannounced OEM.
(3) Despite a leading technology and rapid capacity expansion, we believe the investment cycle ahead of the revenue ramp will take longer and require more capital than expected.”

As for valuation, the analysts remarked, “We maintain our 6-month price target of $9, which is based on a DCF valuation. At the current share price of $9.91, the stock trades at a 2011E P/Revenue multiple of 4.1X and a 2012E P/Revenue multiple of 2.4X.”


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