Saturday, July 14, 2007

A case for power

PWER - better known as PowerOne is a California based company that specializes in building AC and DC power conversion systems. The stock has seen a high of about 100 during 2000 and has fallen to about 4 at the current time. The implosion in the market caused by bust played a big part in this plunge.

The company has not been run properly for the larger part either. The company's acquisitions havent really panned out atleast not yet. This caused a sudden plunge in company's stock price from $5.5 to $3.5. Although the stock has recovered somewhat, the stock hasnt recovered fully yet.

However, there are signs that the company is finally on track to recovery. Several factors should help the company.

1. The power market is on the rebound with imprving semiconductor business.
2. The server farms in the US are expanding, so much so that the total power consumed by server farms outstrip the power consumed by all TVs in US homes. Minimizing such power usage is critical is containing operational expenditure of running large data centers.

The company believes it will be profitable in the final quarter of 2007. If so, it would be first such event in the past several years. Sustained profitability can boost the company stock significantly above the current levels.

Even if the company is not profitable, I estimate the lower end of the price to be about $5 for the company's assets. A lot is riding on current earning announcement and a prediction to return to profitability can turbo charge the stock. Another lackluster announcement can present a significant buying opportunity.

Also on a positive note, insiders have been buying at $3.69 levels though in small quantities.

P.S: Please be sure to check the disclaimer of this blog.

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