The solar sector is the worst-performing sector this year so far. In my Sept. 19 article "A Close Look At Beaten-Down Solar Stocks," I used analysts’ one-year target price changes as a tool to see whether it was time to buy those beaten-down solar stocks. My conclusion was that the “avoid” ratings on solar stocks would stay.
Now that one month has passed, let us check what changes we have seen during the month and see whether it is a good time to own solar stocks now.
First, analysts' one-year target price changes during the month:
oTarget: Analysts’ one year target price on 09/24/2011
cTarget: Analysts’ one year target price on 10/26/2011
tG/L%: Target price percentage changes during the month
From the table we can see that most of the one-year target prices have been revised further downward during the month. Among them, TSL dropped another 24.14%, JASO dropped -21.47, etc. Only SPWRA target price revised up from $16.23 to $17.00.
Second, analysts also modified the solar companies’ 2002 earning estimates during the month, and most modified downward. See the table below:
pEPS: 2012 EPS estimates made on 09/24/2011
cEPS: Current 2012 EPS estimates
g/l%: Percentage changes on 2012 EPS estimates
The table shows that GT Advanced Technologies (GTAT), ReneSola (NYSE:SOL), First Solar (NASDAQ:FSLR), JinkoSolar (NYSE:JKS) did not see much change to their 2012 EPS estimates. But Hanwha SolarOne (HSOL), Suntech Power Holdings (NYSE:STP), LDK Solar (NYSE:LDK), Trina Solar (NYSE:TSL) have made big downward 2012 EPS modifications.
Third, let us look at the stock price changes during the month:
oPrice: Stock close price on 09/24/2011
cPrice: Stock close price on 10/26/2011
g/l%: Percentage changes during the month
The table shows that JKS and Yingli Green Energy Holding (NYSE:YGE) are the top gainers. They gained +35.54% and +12.72% respectively. Canadian Solar (NASDAQ:CSIQ), FSLR and HSOL are the top losers. During the month, CSIQ made an earning warning, FSLR's CEO quit his job, and HSOL’s 2012 EPS estimate saw a big downward revision by analysts. Other stocks traded flat.
Finally, let us find out which stock provides the best return from analysts' view:
cPrice: 10/26/2011 stock close price
cTarget: Analysts one year target price
pG/L%: Possible one year investment return based on today’s close price
From the table we can see that even as analysts continue lowering solar stocks' one-year target prices and their 2012 EPS estimates, they still believe that many solar stocks can still offer investors more than 100% return within one year.
Of course all the data can be modified further in coming months. But we do believe that some selected stocks do present long-term investment values now, and I would like to change my rating on solar sector from "avoid" to "stable."
Disclosure: I am long JASO, SOL.