Seeking Alpha
Recommended for you:
, Optionity (1 click)
Long/short equity, value, options trading, options investing
Profile| Send Message|
( followers)  

In this article, four solar stocks with recent upgrades will be presented, including First Solar, Inc. (NASDAQ:FSLR), Suntech Power Holdings Co. (NASDAQ:SPWR), Suntech Power Holdings Co. (NYSE:STP), and Trina Solar Limited (NYSE:TSL). Fundamental comparison will also be provided for these four stocks.

First Solar, Inc.

First Solar, Inc. manufactures and sells solar modules with an advanced, proprietary thin-film semiconductor technology, and it designs, constructs, and sells photovoltaic (PV) solar power systems. FSLR was up 3.19% and closed at $25.90 on March 6, 2013. FSLR had been trading in the range of $11.43-$36.98 in the past 52 weeks. FSLR has a market cap of $2.26B with a beta of 1.57.

SunPower Corporation

SunPower Corporation is a vertically integrated solar products and services company that designs, manufactures and delivers high-performance solar electric systems worldwide. SPWR was up 1.83% and closed at $12.23 on March 6, 2013. SPWR had been trading in the range of $3.71-$13.88 in the past 52 weeks. SPWR has a market cap of $1.97B.

Suntech Power Holdings Co.

Suntech Power Holdings Co., Ltd., a solar energy company, designs, develops, manufactures and markets a number of PV cells and modules, including a range of value-added building-integrated photovoltaics products. STP was down 3.31% and closed at $1.17 on March 6, 2013. STP had been trading in the range of $0.71-$3.68 in the past 52 weeks. STP has a market cap of $211.58M with a high beta of 3.18.

Trina Solar Limited

Trina Solar Limited, based in China, is an integrated solar-power products manufacturer with a global distribution network covering Europe, North America and Asia. TSL was up 0.48% and closed at $4.17 on March 6, 2013. TSL had been trading in the range of $2.04-$8.68 in the past 52 weeks. TSL has a market cap of $325.26M with a high beta of 3.16.

Upgrade

On March 6, 2013, Raymond James analyst, Pavel Molchanov, closed out his commodity solar short and upgraded ratings FSLR, SPWR, STP, and TSL from underperform to market perform. Molchanov said the reason for these "purely tactical" upgrades is simple: "we think the risk/reward balance has shifted towards a more neutral stance." He notes that four of the commodity solar stocks they cover are down by more than 13% from their 52-week highs - "which have been invariably set earlier this year, in the context of the aforementioned high yield rally." Overall, the analyst thinks the downside is more limited now.

Analysts' Target Prices

First Solar, Inc.

SunPower Corporation

Suntech Power Holdings Co.

Trina Solar Limited

Current Price

$25.90

$12.23

$1.17

$4.17

Mean Target Price

$25.82

$9.00

$0.91

$5.28

Median Target Price

$27.00

$8.50

$0.80

$4.40

No. of Brokers

21

15

10

15

Source: Yahoo Finance

Key Stats Comparison

Fundamentally, FSLR has the most solid balance sheet with $1B total cash and $562.57M total debt. However, TSL's revenue has the fastest revenue growth in the past three years. STP has the worst net margin of -44.2% and ROE of -88.1, as seen from the chart below.

First Solar, Inc.

SunPower Corporation

Suntech Power Holdings Co.

Trina Solar Limited

Industry Average

Market Cap

$2.26B

$1.97B

$211.58M

$325.26M

N/A

EPS

-$1.19

-$2.73

-$3.57

-$3.47

N/A

Total Cash

$1.00B

$457.49M

$473.70M

$807.28M

N/A

Total Debt

$562.57M

$865.55M

$2.26B

$1.37B

N/A

Current Trading Price

$25.90

$12.23

$1.17

$4.17

N/A

Book Value per Share

$41.37

$8.33

$4.40

$12.46

N/A

Revenue Growth (3 year average)

17.7

16.6

17.8

35.0

17.6

Net Margin, TTM

-2.9%

-14.6%

-44.2%

-6.2%

-10.4%

ROE, TTM

-2.7

-33.7

-88.1

-9.9

-13.6

Price/Sales

0.6

0.6

0.1

0.2

0.8

Source: Google Finance, Yahoo Finance, and Morningstar

Performance Comparison

In the past three months, SPWR had led these four stocks with $165.87% gain, where TSL and STP had each gained 47.86% and 36.04%. FSLR was the only lagger with -15.68% performance in the period.

(click to enlarge)

Source: Google Finance

Based on the Numbers..

SPWR had been gaining since the company issued Q1 2013 guidance above analysts' estimates on February 7, 2013. SPWR is the only one trading above its book value and had been outperforming the others in the past three months. However, weak fundamentals remain a concern for SPWR. SPWR has the lowest revenue growth rate among 4 solar socks and has a ROE of -33.7.

FSLR, STP, and TSL had been declining gradually since mid-February. For long-term investors, FSLR remains the safest choice with its strongest balance sheet and lower volatility while trading at a fairly valued price. TSL at the current price of $4.17 has some further upside potential with its faster revenue growth rate while trading much below its book value price of $12.46. STP has the weakest fundamentals. Unless further improvement is seen for the stock, investors should keep on the side-line on this one.

Investors can also gain exposures to the solar stocks via the following ETFs:

  • Market Vectors Solar Energy ETF (NYSEARCA:KWT)
  • Solar ETF (NYSEARCA:TAN)
  • S&P Global Clean Energy Index Fund (NASDAQ:ICLN)
  • NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN)

Note: All prices are quoted from the closing of March 6, 2013. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Source: 4 Solar Stocks With Positive Upgrades But Concerns Remain