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Our previous article dealt with six of the eleven US-listed Chinese solar ADRs. In this article we will cover the last five remaining companies. The six month target prices presented below are simply theoretical prices isolating 2011 EPS estimates.

Just looking at the five solars below, three of the five could continue to sustain share price losses for the short term. The table is based on my current EPS estimates for 2011 and using a modest 6 times PE ratio. I will be presenting a full set of estimates for all solars early next week.

The five solars discussed here:

  • Canadian Solar Inc. (NASDAQ:CSIQ)
  • China Sunergy Co., Ltd. (NASDAQ:CSUN)
  • Daqo New Energy Corp. (NYSE:DQ)
  • Hanwha Solarone Co., Ltd. (NASDAQ:HSOL)
  • JA Solar Holdings Co., Ltd. (NASDAQ:JASO)

Six -Month Target Stock Prices Based on 2011 EPS Estimates

Stock

2011 EPS

Current

Six Month

Potential

Street

Estimate

Stock Price

Target Price

% Gain

Target Price

CSIQ

-0.37

4.41

2.21

-50

7.76

CSUN

-1.61

1.22

0.61

-50

1.13

DQ

2.41

3.65

14.47

296

10.35

HSOL

-0.13

2.39

1.20

-50

3.94

JASO

0.38

2.10

2.28

9

4.84

Current stock prices are as of September 22.

For the three stocks sustaining a FY EPS loss, we have simply assumed that the stock price could fall an additional 50%.

With the exception of DQ, the above numbers are not very encouraging. Although the theoretical value of DQ could rise about 300%, investors should keep in mind that DQ has recorded and may continue to record steadily declining quarterly EPS results for 2011. As well, earnings for 2012 could be lower than 2011.

One piece of positive news for HSOL on September 22 was the announcement of $100 million of bank financing. This was of interest since I feared that Hanwha might continue diluting the existing shareholders when funds were required.

In the short term, some of our solars could continue to face fairly significant share price declines. As mentioned in the previous article, if we look at 2011 in isolation, the conclusion would be to pack up and look for other opportunities.

If we consider 2011 together with 2012 results, the investing picture could look dramatically better. My newly published book, The Emerging Solar Bull Market for 2012 covers three solar growth or loss scenarios for solars. The most likely case provides good arguments for mixed results but an overall moderate growth year for solar stocks. The bull market scenario paints a picture of potentially huge gains for 2012. The worst-case scenario reveals conditions under which every solar investor should consider selling their shares.

A Further Note on JKS

As JinkoSolar (NYSE:JKS) remains my favored stock, I just wanted to mention that the press release yesterday confirmed my belief that they remain the premier solar company in China. They handled the river contamination in a very professional manner. However, for a variety of reasons, I have reduced my 2011 FY EPS estimate to $5.22.

2011

Stock

Q1

Q2

Q3

Q4

EPS Estimate

JKS

2.10

1.82

1.15

0.15

5.22

This is still an excellent result as it gives JKS a paltry forward P/E ratio of only 1.2 times. This stock still has huge potential upside even in this beat-up solar market.

Disclosure: I am long JKS, YGE, DQ.

Source: A Look At Solar Stocks And How Much Lower They Will Go (Part 2)