Stock Analysis: Broadwind Energy (BWEN)
Notes:Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash
Yesterday Broadwind announced that they have completed $34 million worth of tower contracts for 2015. In total, they've sold two-thirds of their production capacity for 2015 with more deals near closing and are also starting on deals for 2016 and beyond. The stock rallied nicely off of this news only to pull back again today. Contracts in an industrial like this are nice, but the catch is they're not a great gauge of business because people can back out of contracts. Essentially, this is what happened the last time we saw the PTC expire. However, I believe this time is actually different. The last time the PTC expired, the country was in a severe depression - companies where looking to hold on to cash, joblessness was running rampant, and building towers wasn't cost effective without the PTC. Now the economy is stronger, companies are flush with cash to work with, and though an extension to the PTC would be ideal, cost effectiveness has improved greatly. I believe we're going to see some filled capacity for 2015 and maybe 50% capacity for 2016 by the end of the year. This is good, but there is a large number of orders that will be front-end loaded to take advantage of the PTC before it expires. What will be the key to gauge going into 2015 will be what orders continue to look like after that. For now, 2015 is looking promising. However, the potential for continued future growth will lay in the 4th quarter with the PTC legislation awaiting some form of extension.
Additionally, we'll learn more about the business' progress in its turn around and if there's room for more positive insights next Thursday. When this announcement went out, the CEO expressed his confidence that things remain strong. To date, he's been true to his word. I hope that continues.