What's up with WFR?
MEMC Electronic Materials (WFR -- get free real time quote from ADVFN
) has been a hard stock to figure out for the past couple months.
Is it the stock that wowed everyone during the last few months after riding the wave of increasing silicon wafer demand from the semiconductor manufacturers, or the stock that has now been downgraded twice by brokers?
Is it the stock that is benefitting from the same trends that have led one of WFR's major competitors, SUMCO, to go public next month, or the company who just won a significant patent suit against that same company?
I'm not sure which of these news items should carry the most weight, but I'm still quit confident in MEMC's long-term success. You can read my earlier article on them here. My argument remains the same:
WFR is the biggest US and one of the biggest international manufacturers of silicon wafers. Not only do they have defensible patents, as we have just seen from their win in a European patent court, but they have another advantage in that they produce their own polysilicon, the raw material for silicon wafers. That has some significance in that there is currently a very tight market for polysilicon due to both increased semiconductor demand and increased demand from the newly-hot solar power industry, so having your own cost-controlled supply of the raw material should be an advantage -- but be careful, as no such imbalance is likely to exist for long. Competitors will open new plants to increase supply ... but still, I believe having their own supply will remain an advantage for MEMC.
The market seems completely complacent about the patent win, so we can assume that the win was already factored into the price -- and I imagine a win in US courts is predicted as well.
No one blinked an eye when MEMC reported that their facilities in Texas were unscathed after the hurricanes.
The competition from the other big three wafer companies remains the same, even though one of them is now going public in Japan -- though I'm balancing in my head the fact that this IPO means the market is hot for this sector right now, versus the point that now one of WFR's major competitors is going to get a big cash infusion.
But really, for those of us who are planning to hold WFR long term, the question is simple:
Will semiconductor demand continue to rise over the next (insert your holding period here)?
Intel, the behemoth of the industry and a major MEMC customer, reports tonight ... stay tuned, their conference call and projections for future growth are likely to impact WFR just as much as, if not more than, WFR's own earnings and estimates.
(Oh, and by the way -- my other holding in the semiconductor industry, FormFactor (previous FORM writeup here), reports earnings tomorrow evening as well ... and they'll also likely move based on Intel's assessment of industry demand as well as on the latest information on their soap-operatic struggle to get their new facility up and running. I'll be paying close attention to that call, too.)
Is it the stock that wowed everyone during the last few months after riding the wave of increasing silicon wafer demand from the semiconductor manufacturers, or the stock that has now been downgraded twice by brokers?
Is it the stock that is benefitting from the same trends that have led one of WFR's major competitors, SUMCO, to go public next month, or the company who just won a significant patent suit against that same company?
I'm not sure which of these news items should carry the most weight, but I'm still quit confident in MEMC's long-term success. You can read my earlier article on them here. My argument remains the same:
WFR is the biggest US and one of the biggest international manufacturers of silicon wafers. Not only do they have defensible patents, as we have just seen from their win in a European patent court, but they have another advantage in that they produce their own polysilicon, the raw material for silicon wafers. That has some significance in that there is currently a very tight market for polysilicon due to both increased semiconductor demand and increased demand from the newly-hot solar power industry, so having your own cost-controlled supply of the raw material should be an advantage -- but be careful, as no such imbalance is likely to exist for long. Competitors will open new plants to increase supply ... but still, I believe having their own supply will remain an advantage for MEMC.
The market seems completely complacent about the patent win, so we can assume that the win was already factored into the price -- and I imagine a win in US courts is predicted as well.
No one blinked an eye when MEMC reported that their facilities in Texas were unscathed after the hurricanes.
The competition from the other big three wafer companies remains the same, even though one of them is now going public in Japan -- though I'm balancing in my head the fact that this IPO means the market is hot for this sector right now, versus the point that now one of WFR's major competitors is going to get a big cash infusion.
But really, for those of us who are planning to hold WFR long term, the question is simple:
Will semiconductor demand continue to rise over the next (insert your holding period here)?
Intel, the behemoth of the industry and a major MEMC customer, reports tonight ... stay tuned, their conference call and projections for future growth are likely to impact WFR just as much as, if not more than, WFR's own earnings and estimates.
(Oh, and by the way -- my other holding in the semiconductor industry, FormFactor (previous FORM writeup here), reports earnings tomorrow evening as well ... and they'll also likely move based on Intel's assessment of industry demand as well as on the latest information on their soap-operatic struggle to get their new facility up and running. I'll be paying close attention to that call, too.)
Labels: WFR
This article posted by One Guy @ 10/18/2005 02:24:00 PM 2 comments
Add to: del.icio.us *Furl *Google *Spurl *reddit *StumbleUpon *Yahoo MyWeb *
Add to: del.icio.us *Furl *Google *Spurl *reddit *StumbleUpon *Yahoo MyWeb *
