Cowen is out positive on Suntech (NYSE:STP), saying they believe the company is poised for a beat-and-raise quarter. Guidance for 2008 shipments ought to be revised up. STP is targeting YE capacity of 1GW, so H2 upside looks do-able with likely incremental silicon supply. STP has an aggressive/diversified silicon procurement strategy. High spot prices seem offsettable by rising conversion efficiency and scale. New Pluto technology and product diversification should expand the P/E. Sees 50%+ upside vs. the market in 12 months and reiterates Outperform rating.
Thinks management may raise 2008 guidance.
They believe STP shares do not yet command full value for its technology and product diversification efforts. As Pluto lines ramp, higher conversion efficiency should aid GM. And, other new products like thin-film for BIPV and Andalay modules further differentiate it from competitors.
Notablecalls: Note that Lehman is out on STP this AM cutting their target to $75 from $100 while keeping their Overweight rating.
The Cowen call strikes me as somewhat surprising as I happen to know that Suntech's management sounded a bit cautious a couple of weeks ago when they spoke to a group of investors. Of course, no guidance was provided (Reg FD). Yet, now we have Cowen out saying they feel STP is going to have a beat and raise quarter when they report tomorrow morning.
The cautious tone has attracted some short-sellers over the past weeks, so I would not be surprised to see some short covering on heels of Cowen's "beat & raise" call. Think the short community has too painful memories from the FSLR short last week.
Anyway, not making a call here but one to watch.
Update, 12PM EST:
Hearing Street chatter Suntech guidance tomorrow morning will be disappointing on the GM side as the co has been struggling to get poly supply deals done, forcing it to buy from MEMC & Hemlock on the spot mkt.
'NCN Solar' comments:
Just a little comment on that, they will likely buy less than 10% of supply on spot but they likely won't go for more supply considering spot rates are over $400. About 50% is long term 40% is sort of in between, sort of deals they make, meaning not as good as long term, but much below spot.
Regardless, can't expect a great STP report, tho long term, you can't overly punish them for near term poly price issues, meaning there will be time to buy this one back its a supply issue, not demand, and I'm looking to buy FSLR tomorrow, if the STP report is weak in fact, and the group trades lower.