Editor’s note: This article was first published in August 2012, and its share prices, support and resistance levels, H1 2012 loss of 33 million euros and analyst consensus reflect that moment. Gamesa later merged its wind business with Siemens in 2017, and the short-selling ban mentioned was temporary.
Gamesa (my personal long-term bet) is trying to take off on the stock market for the twelfth time, after gaining 50% since touching its recent all-time low of close to €1. As we said in previous articles, Gamesa needs a few positive news stories in a row and a good set of quarterly results.
The good news came on a day when the IBEX (Spain’s benchmark index) continued, for the second day running, in a kind of correction, or a return to the main downtrend. Two pieces of good news for Gamesa may have saved it from much heavier losses; in the end it closed with a slight loss of 1.33%. Gamesa announced today a new contract in India to supply 54 turbines producing 75 megawatts to Renew Wind Energy. At the same time came news of a wind turbine supply deal in the United States for a new client (Exergy) that will join the company’s customer portfolio.
In the rumour department, following Obama’s plans to fast-track seven major renewable energy projects, including large wind farms and solar power, something could come Gamesa’s way, since the company has already sold some wind farms in the US (although, as we say, this belongs in the “rumours” section).
With this news, and in the middle of a deep global recession, Gamesa is gradually taking up a position of world leadership in wind power, second only to its rival Vestas, which has announced a poor outlook for orders next year.
All Gamesa needs now is good quarterly results. Last quarter it posted a loss of 33 million euros, though that was not a bad figure considering that the company moved out of operating losses, and next quarter’s numbers could include the wind farms that were sold but not reflected in H1 2012.
Something has changed in the stock: much of the market consensus now likes it and, after a long time, it is getting buy recommendations, with the added positive that no new short positions can be opened. Of course, if once again all the positive news for the stock is overshadowed by negative macroeconomic data, and the stock falls again leaving many investors trapped, confidence in the company in the short and medium term would evaporate once more.
I still say that Gamesa is a company I would value not a few cents higher, but a few euros higher. And if we forget the “quarter by quarter” fashion and look at the company’s long-term potential, the question is not whether Gamesa will be worth €3.75 or €4.60, but whether it will manage to top €37.70, the company’s all-time high. Of course, we probably won’t see that price until the global crisis gives us some breathing room.
The coming days are crucial in defining how Gamesa behaves in the short term. According to technical analysis, the first support would be at €1.32 and the first strong resistance at around €1.66.
Featured image: Luis García, CC BY-SA 4.0, via Wikimedia Commons.
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