Updating Price Targets And Ratings For 5 Solar Companies

by: David Ristau

Earnings season is over, but we are continuing to update price targets, buy/sell ratings, etc., for companies that we currently cover. Today, we have updated several companies. They include Canadian Solar (NASDAQ:CSIQ), JA Solar (NASDAQ:JASO), LDK Solar (NYSE:LDK), Suntech Power (NYSE:STP) and Trina Solar (NYSE:TSL).

The chart below shows new ratings, price targets and buy/sell ranges compared to old ones:

CSIQ – Maintain at Hold, Decrease PT From $20 to $4.50

Canadian Solar is looking like a decent value play at this time. The company had a widening loss in Q3, but they did see sales increase in their latest quarter YoY and QoQ. The company, though, saw margins shrink and recorded a loss as they had to significantly decrease their pricing. The company is in the middle of the pack for most of our financial scores, and we think they are a Hold right now.

JASO – Downgrade from Buy to Hold, Decrease PT From $5.50 to $1.50

JA Solar has some definite issues right now, and we think that the company can no longer be bought. They have to be a Hold until the solar industry starts to recover. JA Solar scores very high on our equity scores, but the company reduced their outlook way below our expectations. The company has a heavy dependence on Europe, and that situation seems very murky right now. The company will be fairly close to breakeven throughout 2012, and we think until they can return to better margins they remain a Hold.

LDK – Maintain at Hold, Decrease PT From $15.50 to $6

LDK Solar got its price target slashed due to a significant drop in margins and significant losses in operating income. The company, though, has done some positive things as of late by reducing short-term debt and replacing it with bonds. The short-term debt has been a major concern for us with LDK. They have over $3B in debt, which just destroys equity value for this company. We do see them as a Hold, but not a stock to acquire right now. The company has deep losses, and it needs pricing to improve for them to come back into profitability. We see that occurring in late 2012.

STP - Upgrade from Hold to Buy, Decrease PT From $9.50 to $3.50

Suntech Power had a great quarter, and we think this company has some great value right now. The company had great gross margins in this past quarter, and they are definitely shining as one of the most profitable companies right now. We see them as very undervalued at their current price. Obviously, the company has a lot of risk and limited upside at this time, but of the companies in the industry we like them at this time. They have done a great job of vertically integrating and reducing cost per watt like Trina Solar.

TSL - Maintain at Buy, Decrease PT From $41 to $13.50

Trina Solar is our favorite solar play. The company has great low cost per watt, maintains good margins, and has one of the strongest balance sheets in the marketplace. We think the company is significantly undervalued at this time, and they can make a major comeback in 2012. The company has great profitability in comparison to competitors. We believe they are the best company in the sector with a better debt to cash comparison, and they are one of the only companies in the industry with free cash flow in the industry.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.