Steven Ralston, CFA

Zacks Initiates Coverage of XZERES

Zacks has initiated coverage of XZERES Corp. (XPWR: OTCBB) with an Outperform rating. XZERES Corporation is an engineered systems company, with a focus on clean and renewable energy. Currently, XZERES primarily designs, develops, manufactures and markets premium small wind turbine systems and related equipment for the generation of electrical power to a wide range of customers. Recently, the company acquired Rochester Power Saver and now also offers power efficiency products.

The small wind industry is an emerging growth industry with industry sales expected to increase at least 20% per year. As market penetration increases, market participants with proven, established and certified products, like XZERES, should experience exponential sales growth and achieve profitability. Within three quarters of operations, management has significantly improved the XZERES 442SR wind product, expanded into multiple sales channels in the United States and opened a European subsidiary. Sequential quarterly sales growth has exceeded 30% and is increasing. Due to the many initiatives recently implemented and also planned for fiscal 2012, such as expansion into Asia, we expect that the company’s sequential sales growth rate will continue to be at least 34% during fiscal 2012.

The Power Management Division was formed with the acquisition of Rochester Power Saver in April 2011. The Division manufactures and markets power efficiency products, which are designed to improve the power factor for commercial and light-industrial customers, thereby reducing their electricity costs by 10% to 20%. The products can also be used by residential customers as power conditioners and as central surge suppressors. XZERES will leverage the company’s sales and marketing expertise to expand the power efficiency product business, especially in the under-served commercial and light-industrial markets. Our initial target is $1.50.
 

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