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Caution: High Risk Trade Ahead

Written By Brian Hicks

Posted August 11, 2008

JA Solar Holdings (JA) August 15 calls are seeing heavy volume of 6,397 ahead of Tuesday earnings.  But it’s an earnings trade, which warrants a tight stop loss policy of at least -25%.  Be sure not to risk the house.  Earnings, regardless of who is bullish, can go either way.

While the stock has seen better days, firms like AmTech still believe it’ll double over the next 12 months.  Here’s what AmTech had to say, according to 

  •  “We believe ASPs [average selling prices] remained strong in 2Q08
  • Despite demand uncertainty as a result of ‘ 09 legislative concerns, we believe estimates for JASO remain low based on Si procurement levels and scheduled capacity ramp
  • Early ‘ 09 ASP negotiations seem to be progressing well for JASO at down 5-10%. This is in-line to slightly better than we have been modeling, giving us further confidence in our ‘ 09 revenue estimates
  • We believe that JASO’s balance sheet entering a period of legislative uncertainty is a significant advantage versus peers following its recent $400M convert
  • We believe that all poly shipments are currently on schedule after some internal poly production delays at Shunda earlier in 2008 (covered by M. Setek supply)
  • We expect management to increase FY08 shipment and revenue guidance given poly procurement levels and scheduled capacity ramp.”

Again, this is an earnings trade.  Use tight stop losses.  Earnings can go either way.  Do not risk the house.  If you’re interested, we’d recommend buying the September 15 JASO call (QJPIC).  We’re speculating on good earnings with a high risk trade.