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Lehman analysts Vishal Shah and Tim Luke Tuesday raised their target prices on the solar stocks MEMC Electronic Materials (WFR), JA Solar (JASO) and Suntech Power (STP).

In an industry note, Shah wrote that last week he attended Suntech’s analyst day and also met with several solar and polysilicon companies in China. His takeaways from the trip:

  • Demand trends are tracking “well ahead” of Street expectations.
  • Polysilicon prices have increased sequentially in Q4 and could increase “substantially” in the 2008 first half.
  • As poly prices rise, some solar companies are looking to vertically integrate to maintain margins.

For MEMC, Lehman’s new target price is $110, up from $90. For JA Solar, they go to $80 from $65. And for Suntech, the new target is $100, up from $80.

Lehman’s key points for the three companies:

  • MEMC: Polysilicon tightness should continue into 2009. Poly prices could rise another 20% in the second half, giving a boost to the company’s revs and EPS.
  • Suntech: They see upside to estimates, and possible multiple expansion.
  • JA Solar: Lehman sees the potential for more upside, “as management continues to execute on new wafer supply contracts and delivers strong 4Q earnings/2008 guidance.” They see the stock as a “name to own” headed into Q4 results.

MEMC Tuesday is up $2.41, or 2.9%, at $85.83. Suntech is up 7 cents at $78.50. JA Solar is up $2.87, or 4.2%, at $70.94.

Source: Lehman Raises Target on Solar Stocks