A funny thing happened with LDK Solar (LDK) on Tuesday.  The stock gapped lower on the open after the company pre-announced figures for the fourth quarter.  The release was not pretty and investors were not pleased.

Basically, the company said that revenue would come in at $425-435 million compared to previous guidance at $555 to 565 million.  Solar shipments look to have been 245-255 MegaWatts compared to previous guidance of 260-270 MW, and gross margins will only be roughly 10-13% (previous guidance was 18-20%).

The fourth quarter data was disconcerting, but what likely spooked investors was a delay in polysilicon production.   One of the most important initiatives over the next few quarters is the internal production of poly.  This will keep the company from having to rely on suppliers for poly which can be difficult to produce, and expensive to purchase.  While the company is actively producing a small amount of poly, it stated that there was a delay in ramping this production to a higher level…  Bad news!

Back to the funny thing… It seems that by the end of the day, LDK was actually trading higher!  Investors were able to shrug off the bad news because the stock was already trading at such low levels.  Shareholders have been largely negative on solar names over the past few months, but once the bad news actually hits the public, it may be that the next surprising data will actually be positive!

Looking to 2009, the company is giving lighter revenue guidance of $2.3 to $2.5 billion.  Despite being lower than previous expectations, the figures are roughly 45% above 2008 levels.  Furthermore, the company is expecting gross margins of 22 to 27%.  The margins are at least partially due to expectations of polysilicon production of 3,000 to 5,000 megatons.  I should note that the poly delay was on the company’s 1,000 MT plant.  It seems that the larger 15,000 MT plant (under construction) is still on schedule and should begin poly production in the second quarter.  It is actually better for the company to gain the experience and make mistakes on the 1,000 MT plant so when the larger one is ready to ramp production, the company will have a better process in place.

Subscribers to the ZachStocks Growth Model have already made 9.5% in the name and we are looking for further gains.  While Oppenheimer lowered EPS estimates to 2.90 for 2009, the stock still trades at roughly 5 times forward earnings.  That’s likely a great deal for such a strong competitor.  LDK is sitting on $380 million in cash and has access to $850 million in additional credit lines.  So I expect them to be financially stable and have adequate resources to continue to build their business.  As the company shows progress in their poly production, and the market begins to realize potential in alternative energy, LDK should prove to be an opportunistic investment.

FD: Author does not have a position in LDK
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Additional Reading:
Trader Mark covers the LDK Warning
Tech Trader Daily: LDK Slashes Guidance, Stock Falls