April 6 Shares of American Superconductor Corp (AMSC.O) plunged 41 percent in pre-market trade on Wednesday, a day after the maker of electrical systems for wind farms said it expected to post a loss for the fourth quarter as its largest customer refused to accept ready shipments.
Late on Tuesday, AMSC said Sinovel Wind (601558.SS), which accounts for about 75 percent of AMSC's revenue, refused to accept March shipments, due to the slowdown in China's wind power market. AMSC also said Sinovel intends to reduce its level of inventory before accepting further shipments. [ID:nL3E7F533E]
Citigroup analyst Timothy Arcuri estimated that the company now had about 2.5-3 gigawatts of excess product inventory, which was produced for Sinovel.
"It will take about six months to work through this inventory before AMSC’s production would start to return for a more normalized level," Arcuri said.
The analyst, who cut his price target on the stock to $17 from $25, also said AMSC will have to raise about $100-200 million to complete 'The Switch' buyout.
In March, the company said it would buy the smaller Finnish rival for $266 million to expand its customer base.
AMSC, which benefited from explosive growth in China's wind turbine market, has been looking to diversify to other markets to cut its dependence on Sinovel. The Chinese wind turbine market is also expected to be flat in 2011.
Shares of AMSC were down at $14.60 in trading before the bell. They closed at $24.88 on Tuesday on Nasdaq.
(Reporting by Megha Mandavia; Editing by Maju Samuel)
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