Shares of Satcon Technology Corp. (SATC) gained 24% in the past week with investors betting on the company's upbeat prospects , and it remains to be seen how the stock is going to perform in the wake of the quarterly report due to be released this week.
For readers who are new to SATC, here's an overview of the company and the upcoming catalysts.
Satcon provides photovoltaic and fuel cell power inverters to businesses and utility companies to efficiently convert renewable energy sources into stable and reliable electrical power. Satcon enjoys more than 50% share in the North American market for large-scale power conversion solutions. The company is also a primary commercial solar PV (photovoltaic) inverter supplier to some of the largest solar PV developers like Chevron, Canadian Solar, ENERGY 21, GCL, Johnson Controls, REC, Samsung, Solon, SunEdison, SunPower, Suntech.
Founded in 1985, the company went public in November 1992. The stock, which touched an all-time intra-day high of $41 in September 2000, now trades around $3.
With continued product innovation, Satcon dominates the high growth utility solar PV and fuel cell industries. The company strengthened its presence in worldwide growth markets , including China and Europe by snapping up new projects this year.
The company is currently not profitable and has been incurring losses since 1995. As of March 31, 2010, Satcon had an accumulated deficit of about $237.2 million. However, since the third-quarter of 2009, the company's revenue and gross margin have improved sequentially over the quarters.
In the first-quarter ended March 31, 2010, the company narrowed its loss to $7.2 million or $0.10 per share from $11.9 million or $0.23 per share in the year-ago quarter. Driven by stronger presence in Europe and China as well as sales of new product solutions gaining momentum, revenue for the quarter improved to $14.7 million from $13.4 million in the comparable quarter a year before. Gross margin rose to 13.8% in the first quarter of fiscal 2010 from 8.2% last year.
As of May 3, 2010, the company had a backlog in excess of $80 million due to significant increase in order volumes in Canada, Europe & China. Backlog is a strong indicator of a company's future performance.
Satcon's second-quarter results are scheduled to be released on August 5. Wall Street analysts expect the company to lose $0.05 per share on revenue of $26.81 million.
The company foresees revenue of $25 million to $28 million for the second-quarter, which represents nearly a three-fold growth over last year. Gross margin for the quarter is expected to increase to 20% with the company completing the transition of production to its lower-cost facility in China. Gross margin is expected to further improve to over 30% in the second half.
As of March 31, 2010 the company had cash and cash equivalents of $11.7 million and had no long-term debt. In order to further strengthen its working capital for continued worldwide growth, the company entered into a $12 million subordinated debt facility with Horizon Technology Finance in June.
If additional funds are raised in the future through the issuance of equity or convertible debt securities, the stockholders will experience additional dilution.
The worldwide demand for clean and renewable sources of energy, such as solar, is being driven globally by a variety of factors, including increasing electricity usage, power grid capacity constraints, fossil fuel price volatility, and harmful levels of pollution and greenhouse gases.
According to GTM Research, demand for PV installations will reach 11.2 GW in 2010, up 58% from 2009.
The PV inverter market is also driven by favorable government policies for renewable energy. While the feed-in tariff programs are stimulating the growth of renewable energy in Europe, particularly in Germany, Italy and Spain, subsidies and tax incentives are the driving forces behind the renewable energy market in the U.S. and Asia.
The increase in PV installations will continue to drive the PV inverter market, which bodes well for Satcon. Wall Street analysts are expecting the company to shrink its loss this year and return to profitability in 2011.
With favorable market trends and improving financials, Satcon is worth taking a look at.
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