The solar sector has been absolutely decimated over the last year as governments have been forced to cut subsidies that have kept the industry afloat. Myriad stocks are down 50% to 80% over the last 9-12 months. The sector has had a mini-rally over the past few days driven in part by government funds being released by the federal government for First Solar's (FSLR) large Antelope project. First Solar, MEMC Electronics (WFR) and Suntech Power (STP) have all bounced over 10% during the past two days. I don't know if this marks the bottom of the solar decline, but one stock I believe has become way too cheap and has substantial upside is GT Advanced Technologies (GTAT)
7 reasons GTAT is deeply undervalued at just over $7.50 a share:
- The stock is one of the few stocks that supply the solar industry where the consensus earnings estimates for FY2012 and FY2013 have not gone done substantially in the last three months. GTAT's estimates for FY2012 have not moved over that time period, and estimates for FY2013 have actually gone up by two cents a share.
- The company has a solid balance and net cash makes up more than 20% of the market capitalization of the stock.
- The stock is significantly under analysts' price targets. The median analyst's price target by the 15 analysts that cover the stock is $11.50 a share.
- Analysts keep underestimating the company's earnings power. It has easily beat estimates for four straight quarters. The average beat over consensus over those four quarters is right at 30%.
- The stock is dirt cheap at under 5 times forward earnings which is an over 40% discount to its historical average.
- The market seems to over discounting its growths prospects. The five year projected PEG on GTAT is a minuscule .44.
- The stock has been cut in half since its highs over the summer like most solar stocks, but appears to have built good technical support here (See Chart).