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Shares of A123 Systems tumbled more than 13 percent before Wednesday's opening bell, after Wunderlich Securities said that the struggling electric vehicle battery maker's promise of new technology down the road won't be enough to keep it afloat for long.
On Tuesday, the Waltham, Mass., company announced that it had developed new lithium ion technology capable of operating in extreme heat or cold. Heat generated by powerful, next-generation batteries is one of the biggest hurdles in developing cars that do not use fossil fuels.
The news sent A123 soaring to close up 52 percent at $1.58 after a day of extremely heavy trading.
A123 said its Nanophosphate EXT technology is designed to significantly reduce or eliminate the need for costly heating or cooling systems, which should create significant new opportunities for the company. It expects to begin producing battery cells that include the technology in the first half of 2013.
But Wunderlich Securities analyst Theodore O'Neill was skeptical. In a note to investors Wednesday, he said that new battery technologies are "a dime a dozen," do nothing to solve the company's current problems and can take years to develop and get into production.
"Years are not what A123 has. Indeed, according to our analysis it will need $400 million more than it's got to make it through the next 18 months, and even then it would not be enough," O'Neill wrote.
"We reiterate our `Sell' rating and our 50-cent price target, which would be zero except that we believe the factory has some residual scrap value."
The announcement of the technology came less than two weeks after A123 warned that it may not be able to stay in business unless it's able to secure more financing.
A123, which went public in 2009 and has yet to post a quarterly profit, said that it's trying to raise additional money to fund its operations and is looking at other alternatives.
The company has been in talks with potential partners for substantial investments, while it has also looked at ways to raise cash in the capital markets and cut costs.
Shares of A123 Systems Inc. dropped 21 cents to $1.37 in premarket trading.