) to hold, from buy.
Analyst Tim Arcuri says he believes investors may be disappointed by a lack of positive impact to gross margin stemming from the company's fully-back integrated operations (i.e. its ability to self-supply granular polysilicon, a key raw material). Arcuri says his channel checks suggest the culprit is pricing; 300mm wafer pricing was down 5% to 10% in the most recent contract talks with at least two major customers. Compounding this, MEMC looks overvalued, according to Arcuri; at today's opening, the stock was 17.5 times his 2005 EPS estimate of 90 cents. Despite the downgrade, the analyst raised his $1.17 2005 EPS estimate to $1.20 and his $15 price target to $16.50.