Canadian Solar (NASDAQ: CSIQ) develops, manufactures and markets solar module products for the conversion of sunlight into electrical energy. Offerings include solar panels for residential and industrial use, plus customized modules that customers incorporate into their own products. The modules power such special-purpose devices as bus stop lighting systems and vehicle battery chargers. Canadian Solar is incorporated in Ontario, but conducts all of its manufacturing operations through six subsidiaries in China. The firm is actively involved in government projects to bring solar power to rural Chinese communities. Clients are distributors, systems integrators and manufacturers in North America, Asia and Europe.
The company pleased investors last week, when it raised its 2008 output guidance from 200-220 MW to 230-260 MW and boosted its estimated annual revenue from $650-$750 million to $750-$870 million ($836.06M consensus). Management pointed to continued robust market demand for its products.
Canadian Solar (NASDAQ: CSIQ) is recently up $5.97 to $48.49 after increasing its 2008 annual revenue and output guidance to reflect the sales of e-Module products.
CSIQ call option volume of 15,574 contracts compares to put volume of 5,013 contracts. CSIQ July call option implied volatility is at 86; puts are at 97; near its 26-week average according to Track Data, suggesting non-directional price risk. CSIQ puts are more expensive than calls because CSIQ is difficult to borrow.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Suntech Power Holdings Co. (NYSE: STP), which saw its stock surge some 150% in 2007, didn't have such a good 2008 so far with its stock plunging about 44% year-to-date. But since setting a 52-week low of $28.19 on March 22, the stock has rebounded nicely, up over 55%. Roller coaster or what?!
Well, today, the maker of photovoltaic cells and modules said first-quarter earnings more than doubled on 76% higher revenue. Earnings reached $55.8 million, or 33 cents an American depositary share, beating analysts estimates of 28 cents. Revenue reached $434.5 million. Gross margins also expanded nicely and Suntech reiterated revenue estimates for 2008.
Early in the morning, STP shares jumped over 7% in premarket trading in response to the report but have not kept this up. Shares are now trading at $45.73, down over 1%, probably declining with the rest of the sector following Goldman Sachs's downgrade of Solarfun (NASDAQ: SOLF) to Sell from Neutral. SOLF shares are down over 18% taking LDK Solar (NYSE: LDK), Trina Solar (NYSE: TSL) and Canadian Solar (NASDAQ: CSIQ) down with it -- 5%, 8% and 13% respectively, to name but a few.
Canadian Solar (NASDAQ: CSIQ) develops, manufactures and markets solar module products for the conversion of sunlight into electrical energy. Offerings include solar panels for residential and industrial use, plus customized modules that customers incorporate into their own products. The modules power such special-purpose devices as bus stop lighting systems and vehicle battery chargers. Canadian Solar is incorporated in Ontario, but conducts all of its manufacturing operations through six subsidiaries in China. The firm is actively involved in government projects to bring solar power to rural Chinese communities. Clients are distributors, systems integrators and manufacturers in North America, Asia and Europe.
The company pleased investors last week, when it reported Q1 EPS of 61 cents and revenues of $171.2 million. Analysts had been looking for 31 cents and $151.9 million. The CEO cited robust market demand, strong pricing and effective management of foreign exchange exposure for the successful quarter. Management also guided Q2 revenues to $185-$190 million, versus consensus of $167.62 million.
MOST NOTEWORTHY: Anadigics, Crystal River Capital and Canadian Solar were today's noteworthy downgrades:
Oppenheimer downgraded shares of Anadigics (NASDAQ: ANAD) to Perform from Outperform on valuation following the recent run-up.
Wachovia downgraded Crystal River Capital (NYSE: CRZ) to Market Perform from Outperform citing the uncertain near-term strategic outlook.
Broadpoint downgraded shares of Canadian Solar (NASDAQ: CSIQ) to Buy from Strong Buy on valuation following yesterday's rally but raised their target to $45 from $29.
Experience has taught me to respect the price action the day after earnings. So when I see LDK trying to break out of a now 5-month old range, pretty much between $30 and $40 -- yes it was up to $50 in January and $20 in March, but those are outliers -- this is a very bearish sign. It's so bearish that I suspect that unless solar plays really heat up again, this stock will need many more weeks or months to break $40, and even then, it's got a ton of resistance all over the place due to bitter buyers in at much higher prices who will be looking to cut their losses.
MOST NOTEWORTHY: Canadian Solar, Qimonda and Eagle Test Systems were today's noteworthy upgrades:
Oppenheimer upgraded shares of Canadian Solar (NASDAQ: CSIQ) to Outperform from Perform after channel checks indicated the company's internal cell ramp is proceeding on plan. They are more positive on shares following the recent pullback.
Qimonda (NYSE: QI) was upgraded to Buy from Neutral at UBS, as they expect the DRAM supply/demand to balance out in the second quarter 2008 followed by undersupply.
Broadpoint raised Eagle Test Systems (NASDAQ: EGLT) to Buy from Neutral after the company reported Q1 results.
OTHER DOWNGRADES:
EADS (OTC: EADSY) was upgraded to Buy from Sell at ABN Amro.
Jefferies upgraded Unisys (NYSE: UIS) to Hold from Underperform.
BEA Systems (NASDAQ: BEAS) was upgraded to Market Perform from Underperform at Bernstein.
Over the past few months, solar stocks have had more than their fair share of ups and downs. Last month, they were so volatile it seemed as if I was writing an article about another solar play every other day, introducing investors to the sector by casting the characters in a fictional movie to be called Solar's Eleven, encouraging buying on breakouts in this article, and warning investors to drop them as if they were poorly selling music artists in this article. (Yes, I go over the top sometimes, but it's all to help you better understand how the stock market works.)
So, what changed? Perception. While these companies all still have great potential, they are speculative and in bear markets, speculative stocks, especially those that don't continuously put out spectacular news, get crushed -- as shareholders in Apple (NASDAQ: AAPL), Baidu.com (NASDAQ: BIDU) and VMware (NYSE: VMW) have learned the hard way.
On Friday, I bought shares of solar cell maker Solarfun (NASDAQ: SOLF) not because I think solar is a great business these days -- I do -- but because the company's stock showed exceptional strength on Friday, closing at a new high. And it did this smack in the face of short sellers who are betting on lower stock prices and, perhaps more importantly, after consolidating nicely over the past few weeks.
At Friday's closing price of $28.76, the stock is still $3 off its all-time intraday high of $31.80, but this strong close tells me there's the potential for further upside, no matter how many people refuse to believe it. Strong earnings/guidance, a new big time investor, and this sector's new-found popularity (as I noted in this article) and a whole lot of hype have helped this stock double from the low teens in November (along with other surging solar plays like Canadian Solar (NASDAQ: CSIQ), First Solar (NASDAQ: FSLR) and JA Solar (NASDAQ: JASO).
The majority of market commentators advise investors to stay away because the price surges are mania-esque, valuations can be argued as stretched, the solar industry has capacity issues, and most importantly, they don't want to risk losing their jobs or getting sued after some beginner investor loses his or her life savings by thinking these stocks could triple again within a month. I agree; while this sector is certainly not for everyone, I've made millions playing these volatile stocks. So take it from someone who's seen this thousands of times before; while there's upside, stocks that move this quickly on speculative news can also come crashing down even quicker -- as investors in LDK Solar (NYSE: LDK) learned the hard way -- if and when the pendulum reverses.
John McNay, portfolio manager of Essex Investment Management, provided some good investment ideas on the evolving high-tech power business in this weekend's Barron's Magazine (subscription required). A few of these we blogged about in the past, but they're worth noting again.
Sunpower Corporation (NASDAQ: SPWR), the Cypress Semiconductor Corporation (NYSE: CY) spin off, makes semiconductors for solar cells and solar panels
MEMC Electronic Materials Inc (NYSE: WFR) makes the polysilicon that is needed to manufacture the solar cells and panels based on semiconductor technology
Suntech Power Holdings (NYSE: STP), First Solar Inc (NASDAQ: FSLR), Canadian Solar Inc (NASDAQ: CSIQ) and Trina Solar (NYSE: TSL) were other stocks mentioned.
Sunpower and MEMC we have blogged about and know the companies reasonably well. The others you have to do your homework on, as these are new ideas to this Fly.
TJ Rodgers, Cypress Semiconductor's CEO, referred to Sunpower as Intel during the 1970s. That is a big statement. This is an important industry that will get a lot of investors' attention during the next five years. Solar energy utilizing semiconductor technology is an investment theme that is still in its very early stages.
manufactures and markets solar module products for the conversion of sunlight into electrical energy. Offerings include solar panels for residential and industrial use, plus customized modules that customers incorporate into their own products. The modules power such special-purpose devices as bus stop lighting systems and vehicle battery chargers. Canadian Solar is incorporated in Ontario, but conducts all of its manufacturing operations through six subsidiaries in China. The firm is actively involved in government projects to bring solar power to rural Chinese communities. Clients are distributors, systems integrators and manufacturers in North America, Asia and Europe.
Canadian Solar
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