An old rule of thumb says it is difficult to make any real money from names where the analysts are already all in agreement. The idea is that everybody already knows the story, and the only way to profit is to be contrarian (and right!). So, what should investors make of MEMC Electronic Materials (NYSE: WFR)? Analysts are all over the place on this name, and this seems like a classic case where an investor with better information (or a luckier guess) could make some real money.

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Third Quarter Results - Better But Not Better Enough
In a vacuum, there would seem to be little wrong with the company's third quarter. Revenue rose 62% from last year and 12% from the Q2, as solar materials were up strongly and semiconductor materials demand was positive as well. Nevertheless, the company was about 6% shy of analyst estimates, and there is ample skepticism about the near-term outlook for demand in both semiconductors and solar energy.

Below the top line, the performance was also mixed between what looks like solid improvement and results that were below analyst targets. Gross margin improved more than 1,000 basis points from last year, but this was several hundred basis points below most targets. Semiconductor margin improved a bit on a sequential basis, but solar worsened slightly. Operating income was also positive this quarter, reversing year-ago and quarter-ago losses.

The Road Ahead Is Shadowy
Analysts (and institutional investors) like a lot of hand-holding, so it is not hard to imagine that the company's decision to suspend formal guidance due to unresolved accounting questions around SunEdison projects irked more than a few people. Nevertheless, the company's comments on the outlook for the individual businesses suggests that next year could be a pretty solid year. (For more, check out The Bottom Line On Margins.)

Looking around at other companies involved in the front-end/materials side of semiconductors - companies like Entegris (Nasdaq: ENTG), Cabot Microelectronics (Nasdaq: CCMP) and ATMI (Nasdaq: ATMI) - suggests there is not exactly rampant pessimism right now. Then again, companies more leveraged to wafers - names like Renewable Energy (OTCBB: RNWEY) and Sumco (OTCBB: SUOPY) - are not doing nearly so well in their local markets, so there is definitely some pessimism about the wafer part of the business.

Longer term, there is always reason for concern in this business. The wafer industry follows a pattern of "over-build, transition, shortage, build-out" over and over again, and those erratic periods of shortage and surplus play havoc with business models. Even the emergence of solar energy as a more significant customer does not save the day. Long-term contracts with companies like Suntech (NYSE: STP) are on balance a plus, but it is not as though solar power currently stands on its own (demand is heavily tied to subsidies). (For more, check out The Future Of Solar.)

The Bottom Line
Pondering an investment in MEMC brings to mind one of Clint Eastwood's most famous movie lines - "You've got to ask yourself one question: 'Do I feel lucky?'" If an investor is confident that MEMC has figured out a more sustainable business model and the erratic boom/bust cycles of the past are not to be repeated, then an investment here could do quite well. Skeptics, though, are still adamant that it has always been a commodity business, is currently a commodity business, and will always be a commodity business - and should be valued (and traded accordingly). (For more, check out The Characteristics Of A Successful Company.)

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