Why Has A123 Systems Run Out of Juice in 2012?

The first half of 2012 is in the rearview mirror, and investors are gearing up for what looks to be an action-packed ending. There are bound to be some big winners -- and more than a few duds -- no matter what happens in the United States and abroad.

Will your favorite stock have its victory lap as we hit the home stretch, or will it fall back in the pack? First-half performances can hold some clues, so let's look to the recent past to find out whether A123 Systems (NAS: AONE) deserves a place in your portfolio going forward.

First-half recap
A123 has been one of 2012's worst performers.

AONE Total Return Price Chart
AONE Total Return Price Chart

AONE Total Return Price data by YCharts

Here are a few financial snapshots of its recent performance:

Market Cap

$154.9 million

Trailing 12-Month Revenue

$152 million

TTM Net Loss

($329 million)

TTM Free Cash Flow

($340 million)

Most Recent Quarterly Revenue

$11 million

MRQ Net Loss

($125 million)

MRQ Free Cash Flow

($56 million)

MRQ Revenue / Net Income Y-o-Y Change

(38.9%) / (131.5%)

Motley Fool CAPS Rating (out of 5)


Source: Morningstar.

What the numbers don't tell you
A123 started the year with a show of strength and an optimistic price target. That positive momentum didn't last long. Fisker Automotive, A123's top customer and one of the few non-Tesla car companies pushing for all-electric vehicles, canceled "Project Nina" in February.

A partnership with India's Tata Motors (NYS: TTM) , announced a month later, wasn't enough to stave off the bears, especially after an abysmal first-quarter loss fell far below analyst expectations. Battery-cell defects sent shares even lower after A123 announced a recall, and they've traded near that low ever since.

There have been tidbits of good news bobbing in the red ink. Fisker finally began delivering Karmas to customers at the end of May. Combined with news of the arrival of Tesla's Model S in showrooms, there's finally evidence that electric cars are making a splash beyond the somewhat tepid sales of Nissan Leafs and General Motors' (NYS: GM) Chevy Volts. A123 also announced a new battery technology in June, promising better performance at higher battery temperatures.

Recent good news hasn't been able to distract investors from the company's many problems. A good deal of A123's cash-flow issues are tied to its massive production overcapacity, as it's in the semi-unique position of being a tiny, specialized company funded by the same federal money flowing to auto-manufacturing giants GM and Ford (NYS: F) . A failed battery program won't kill either automaker, but A123 doesn't have the scale or diversity to cushion itself.

A123's attempted diversity, in the form of smart-grid storage, also remains elusive. The company's lately been seeking "strategic alternatives," so a buyout or reorganization may be in the offing. Tesla CEO Elon Musk slammed the battery industry at his company's most recent shareholder meeting, kicking the battery maker he shunned while it's already struggling to get off the ground.

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At the time thisarticle was published Fool contributorAlex Planesholds no financial position in any company mentioned here. Add him onGoogle+or follow him on Twitter,@TMFBiggles, for more news and insights.The Motley Fool owns shares of Ford and Tesla Motors.Motley Fool newsletter serviceshave recommended buying shares of Ford, General Motors, and Tesla Motors and creating a synthetic long position in Ford. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.

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