Update Maxwell Technologies (MXWL)
09/28/2009 12:07 pm EST
I'm going to keep Maxwell Technologies (Nasdaq: MXWL) in my Jubak's Picks portfolio. Just when the stock hit my $18 target price (a little early since that was the target for March 2010), the company announced a huge win in the automotive market. So I'm raising my target price with this update.
(I think Maxwell Technologies is an example of a next market stock of the sort I described in this recent post. That's another reason to hold onto these shares.)
On September 22, Maxwell Technologies reported that Continental AG (OTC: CTTAY), one of the biggest suppliers of electronic and mechanical systems to car makers, had picked Maxwell's BOOSTCAP ultra capacitors as the energy storage component in a voltage stabilization system it has developed to improve fuel efficiency and reduce emissions by shutting off the engine when a car slows and then restarting it when the driver steps on the gas. Maxwell's ultra capacitors store electricity to provide power for restarting the engine without overworking the battery.
What's important about the win at Continental is that it's for a high-volume product in an industry that's rapidly introducing new technologies to improve mileage. Carmakers also face a big tightening of emissions standards as Europe implements its carbon reduction goals.
I don't expect delivery to begin until the fourth quarter of 2009 with volume hitting between 10,000 and 20,000 in 2010 and then escalating further in 2011. The average ultra capacitor content per car will be around $100, Needham & Co. calculates.
The win at Continental also validates the product and is likely to lead to other wins.
Needham estimates 2009 revenue at $102 million, a 25% increase from 2008. I estimate that will increase to at least $132 million in 2010 and $175 million in 2011. Profit margins are likely to rise with production volumes and with the company's move of some ultra capacitor production from Switzerland to China.
As of September 28, I'm setting a new target price of $25 a share by July 2010.
Full disclosure: I own shares of Maxwell Technologies in my personal portfolio.