Update: JA Solar Earnings Q2 2014

| About: JA Solar (JASO)


JA Solar missed earnings estimates for Q2, but posted solid year-over-year gains.

The earnings miss was a disappointment, but I still have a positive long-term outlook for the company.

Although I didn't anticipate an earnings miss in my last article, I still think JA Solar will perform well over the long term.

JA Solar (NASDAQ:JASO) missed its revenue and earnings estimates for Q2 2014. The stock dropped over 6% on the news, giving it a more attractive valuation. Revenue missed estimates by $2.88 million and earnings missed estimates by 7 cents per share. On the bright side, the company posted solid year-over-year increases. Revenue increased 53% to $390.5 million y-o-y, while EPS increased to $0.14 as compared to a loss of $0.58 in Q2 2013. Gross margin increased 710 basis points to 15.2%. Although the stock is down since my last article, I am still positive about the company for the long term. JA Solar did significantly exceed its earnings estimates for Q4 2013 and Q1 2014.

Total shipments increased 47% y-o-y to 681.8 megawatts (MW). Shipments of modules and module tolling increased 75.6% to 445.8 MW. Cell and cell tolling shipments increased 12.5% to 236 MW. This was decent performance as the company is transitioning from cells to modules as its primary source of revenue. JA Solar expects shipments for Q3 to be in the 730 MW to 760 MW range. The company expects total shipments for the full year of 2014 to be between 2.9 GW to 3.1 GW up from previous estimates of 2.7 GW to 2.9 GW. The new guidance includes 200 MW of module shipments to JA Solar's downstream projects.

In my last article on JA Solar, I highlighted how the stock is attractively valued relative to its peers. The recent sell-off in the stock is a short-term overreaction to missing quarterly estimates in my opinion. The stock now trades 42% below its book value per share and only 6.4X next year's expected earnings of $1.47. I think that the recent weakness in the stock is a buying opportunity for the long term as revenue and earnings are expected to grow at a high rate for 2014 and 2015.

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