Lehman Raises Target on Solar Stocks

Includes: JASO, STP, SUNEQ
by: Eric Savitz

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