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Reiterating his bullish case for Hoku Scientific, Inc. (HOKU), Zacks senior utility sector analyst Jon Kolb explains why the future looks bright for the fuel cell technologies developer:
Successful execution of existing contracts, including a new poly-silicon supply agreement with Suntech Power valued at up to $678 million over up to 10 years, as well as other significant contracts, large order bookings with potential customers, and higher revenue recognition, collectively make HOKU a compelling growth story. Nevertheless, we cautiously note that a diminishing significance of fuel cells, increasing O&M expenses, earnings dilutive stock issuance and a strong competitive challenge in the alternative energy industry may present material risks to the company.
In the recent past, HOKU common stock delivered strong stock price performance with the stock trading up 60.39% over the last 6 months, up 158.57% over the last 12 months and up over 255.20% year-to-date, and significantly outperforming the broader S&P500 index in each period. Looking ahead over the next 6 months and into 2008, we expect this upward trend to continue as financial metrics continue to improve in-line with company fundamentals.
Accordingly, given significant new contracts, particularly the $678 million ten-year poly-silicon supply agreement with Suntech Power, we believe that HOKU remains undervalued. We maintain our Buy recommendation with a six-month target price of $13.00, representing 32.7% upside potential and only 13.3x our forward fiscal year 2009 EPS estimate.
Read the full analyst report on HOKU.
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