The downgrade came a day after Evergreen said it swung to a fourth-quarter loss as charges connected to the closure of a research facility more than offset a spike in sales.
PiperJaffray analyst Jesse Pinchel said that the company's profitability prospects have become "murkier" in the last two months as competition in the industry has escalated. He lowered his price target to $2.50 from an earlier estimate of $5. He also downgraded Evergreen Solar's rating to "Neutral" from "Buy."
Pinchel said one of the company's greatest risks is its eroding polysilicon cost advantage. As Evergreen Solar uses 30 percent to 35 percent less silicon per watt compared with its competitors, it typically holds a better cost position in a high-cost silicon environment. However, as the price of polysilicon declining faster than expected, Evergreen Solar is rapidly losing that advantage, Pinchel said.
Shares of the company closed at $2.22 on Thursday.
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