American Superconductor Corporation (AMSC) is a technology company operating in the two primary markets of wind energy and smart grid infrastructure technology. American Semiconductor’s growth potential is based on its solid backlog of $956 million, its strong Chinese exposure, and growing international operations.
However, we believe the above positives are already factored in the current valuation of the company. Also the company’s excessive dependence on Sinovel, headwinds in its Superconductor segment, and intense competition in the power system business looms large over the valuation of the company.
Consequently, we downgrade our recommendation to Underperform until the bulge in valuation of the company corrects itself. Our target price of $26.00 represents 23.4X 2011 EPS.