Expecting Solarfun to Beat Q1 Estimates

| About: Hanwha Q (HQCL)

Solarfun Power Holdings (SOLF) is set to report earnings prior to the market open on Wednesday, May 21st. Solarfun is a leading global manufacturer of solar technology.

SOLF is expected to earn .15 cents per share for its 1st quarter of 2008. The most recent solar stock results lead us to believe Solarfun should announce earnings and revenues that will beat investors’ and analysts’ expectations.

The latest solar stocks to report earnings blew past expectations:

ReneSola (NYSE:SOL) saw its sales triple and handily surpassed Wall Street’s expectations.

Canadian Solar (NASDAQ:CSIQ) reported earnings of .61 cents per share while analysts thought Canadian would check in at .31 cents.

These exceptional results are probably what led Citigroup analyst Jim Liang to tell clients that “solar fundamentals are currently very strong, with the rising tide lifting all boats.”

When Solarfun’s shares have risen into earnings, the stock has lifted off in the days following its earnings announcements. Similar sizzling performance from SOLF could lead to explosive upside in SOLF’s share price as 35% of its float is sold SHORT.

Even if Solarfun’s report card falls a bit short of its peers, we feel SOLF’s shares are reasonably priced. Considering SOLF’s triple digit growth rate, a forward PE of 18 times 2008 expectations and a current Price to Sales Ratio of 2.5 seem relatively inexpensive to us.

Our short term outlook is buoyed by more than Solarfun’s earnings prospects, history of post earnings POPS, potential short squeeze and fair valuation.

Our analysis of SOLF’s chart is exceedingly optimistic. As you see in SOLF’s chart below, a recent spike in volume, acceleration in the stock price and the MACD breaking free from a 6 week consolidation to cross above zero all converge to bring The Correct Call to one conclusion: The stock has every reason to move a lot higher if management delivers the goods on Wednesday morning.

Disclosure: Author has a long position in SOLF