First Solar thin film photovoltaic modules, is seen
in this undated handout photo.
REUTERS/Blitzstrom/Beck Energy/Handout
From SeekingAlpha
By Eric Savitz
About stocks: CSIQ, STP
November 03, 2008
While solar stocks have plunged 60% over the last three months, there could be more downside ahead, Barclay’s solar analyst Vishal Shah warned this morning.
In a series of research notes, Shah cautions that the solar sector financial reports for the remainder of the third quarter reporting period “could turn out to be disappointing as concerns over potential inventory build triggered by [the] credit environment and FX headwinds prompt companies to maintain a cautious outlook on Q4 and [first half 2009] earnings.”
Shah notes that the solar companies he follows generate more than 90% of revenue from Europe. He says that for some companies selling into the European market in Euros and purchasing supplies in Chinese renminbi, gross margins could drop from over 20% in the first half of 2008 to well below 10% over the next several quarters. Shah also sees increasing risks of channel inventory build in Europe “as the credit markets outside of Germany completely frozen and even within Germany, large projects above 4 MW are likely to face greater difficulty in securing financing.”
Shah expect spot market prices for polysilicon, wafers and modules all to come under “significant pressure over the next few quarters.”
In Shah’s view, demand for solar panels will decline sequentially in both Q4 of this year and Q1 of next year, while supply is likely to rise 10-15% in each quarter. To avoid inventory build, he says module supply reductions would required of 20% in Q4 and 60% in Q1.
Shah says the 60% drop in in solar stocks has discounted some but not all fundamentals concerns; he sees further downside ahead. “Shares may not bottom until excess inventory has been worked through the channel,” he writes.
Shah today cut his ratings on both Suntech (STP) and Canadian Solar (CSIQ) to Underweight from Equal Weight. For STP, he chops his Q4 EPS estimate to 28 cents from 45 cents; for ‘09, he now sees $1.15, down from $2.35. His price target goes to - brace yourself, STP bulls - $11 from $60. Likewise, for CSIQ, his Q4 estimate is now 38 cents, down from 56 cents, while his 2009 estimate is reduced to $1 from $2.85. His price target for CSIQ is now $8, down from $18.50.
Despite the bearish call, both STP and CSIQ are trading higher this morning: STP is up $1.50, or 8.6%, to $19, while CSIQ is up $1.20 , or 12.4%, to $10.88.
Related Posts :
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- Solar Bubble Burst !!!
- SeekingAlpha: More Downside Ahead for Solar - Barclay's, November 03, 2008
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