A123 Causing Investors' Patience To Flicker

Just because investors say that they expect and accept that there will be volatility and setbacks with emerging technologies and the companies behind them, that does not mean that they will not punish offending stocks anyway. As A123 Systems (Nasdaq:AONE) announces another disappointing quarter and some commercial setbacks, investors appear ready to take the stock out to the woodshed one more time.

A Challenging Quarter
Although A123 met the consensus estimate for revenue this quarter (up about 11% to $26 million), it seems unlikely that anybody will care about that number. The company is still a pre-commercial company for all intents and purposes, so it is not a relevant figure.

What is more relevant is the company's report of a higher gross loss - sales rose about $2.6 million, but the gross loss worsened by $1.2 million to a loss of $3.1 million. The company had some yield issues and that led to higher expenses, but it brings to mind the old joke, "we lose money on every sale, but we'll make up for it with volume".

More seriously, the setback will feed the bears who are betting on the idea that A123 cannot profitably scale up its manufacturing process to meet the demand that investors are counting on in the future. While it can just as easily be argued that all new technologies have kinks in the initial production phases and that it is better for a company to work them out before getting large orders, the market is likely to take a "show me" attitude in the meantime. 

For the full piece, please go to:
http://stocks.investopedia.com/stock-analysis/2010/A123-Causing-Investors-Patience-To-Flicker-AONE-HEV-GE-JCI-NAV1116.aspx