Auriga Initiates Coverage of Solar Stocks

Solaranalyst Mark Bachman of Auriga USA (formerly of Pacific Crest) initiated coverage of several solar stocks after the bell today.  Hat tip to Street Insiderfor the following analyst comments:

Trina Solar (TSL) initiated at Buy with $34 pricetarget (about 30% above current levels). 
“We initiate coverage of Trina Solarwith a Buy rating as the most under appreciated Chinese solar company we follow. While the stock is up better than the rest of the group sincethe 4Q08 lows, the stock still trades at just 11.4x our 2011 EPS of$2.29. Market concerns for the stock center on the modeled sequentialgross margin decline after the big 4Q09 beat and the flat 1H/2H10 salesguidance given during the call. We believe there is additional upside in 2H10 should demand materialize stronger than current expectations,coupled with TSL responding with additional capacity expansion plans.” More TSL analysis here

Solarfun Power (SOLF) initiated with Buy and $12 price target (about 40% above current levels).
“We believe SOLF does not receiveappropriate credit for its module relationship with Q-Cells and Q-Cells’ subsequent relationship with SunEdison. While this is a tollingarrangement, it does aid the development of SOLF’s sales channel outside of Germany, the chief complaint of investors given what we view as theover-hyped and expected drop-off in 2H10 German sales; shipments intoGermany have historically accounted for more than 50% SOLF’s sales. Wesee little risk to management’s guidance of 600MW of shipments, whichleads us to our above-consensus revenue forecast in 2010. Our pricetarget is 12x our 2011 EPS of $1.03.” More SOLF analysis here

Yingli Green Energy (YGE) initiated with Buy and $18price target (about 45% above current levels).
“YGE is arguably the largest Chinesesupplier of modules and rivals Trina as the lowest cost producer. The4Q09 conference call was confusing, which is often the case for YGE, asinvestors sought explanations for several 1x items. The resultingsell-off created an attractive entry point in the stock. YGE’s low-costmanufacturing structure enables it to gain share while delivering anappealing margin profile. In our view, the Street is too bearish withregard to cost reductions, thus we expect consensus estimates to trendtowards our estimates.” More YGE analysis here

Suntech Power (STP) initiated with Hold and $15 pricetarget. 
“Our model is largely in-line withthe Street consensus, and we are lacking a catalyst to either be long or short the stock. Near-term earnings are not an issue, sizable capacityis already in place and still expanding, and the company appears to beFCF neutral on a moderate capex spend. The distraction of the GlobalSolar Fund (GSF) remains, but is likely priced in at current levels.Thus we are lacking a catalyst to make a definitive stock call. We findthe stock fairly valued using a 15X multiple on our 2011 EPS of $1.00.” More STP analysis here

First Solar (FSLR) initiated with Hold and $143 pricetarget (10% above current levels). 
“We believe the consensus isoverestimating 1H revenue while underestimating 2H revenue. The revenuedisconnect extends to the EPS estimates as well. While we currently seestrong demand for FSLR’s product, we believe actual results will fallshort of the Street estimates and will likely cause the stock to movelower from current levels.” More FSLR analysis here

JA Solar (JASO) initiated with a Hold and $6.50 pricetarget (nearly 10% above current levels).  More JASO analysis here
“While we recognize JASO as one of thevolume, price, and quality leaders in the photovoltaic (PV) industry,capacity expansion plans should only add minimal quarterly shipmentgrowth over 4Q09’s level. With capacity modeled at 1250MW by 4Q11, wealso struggle with the lack of meaningful EPS growth in 2011 given amoderate level of capital investment. In order for JASO to become moreattractive, management would have to enact a much more aggressive capexplan, in our view.”

Canadian Solar (CSIQ) initiated with Hold and $25price target.  More CSIQ analysis here
“While we are impressed thatmanagement has built an exceptional sales channel, CSIQ’s unbalancedmanufacturing profile subjects it to price variations at its suppliers,which results in historical operational volatility. Combine this with ahistorical desire to compete on price, and we are not convinced CSIQ can consistently report better than a 15% gross margin and 7% operatingmargin versus the consensus margin structure of 16% and 9%. Although weare projecting year-over-year revenue growth of 79%, the EPS mismatch in 2010 cannot be ignored; the 2010 consensus EPS estimates need to belowered before we turn more positive.”

SunPower (SPWRA) initiated with Sell and $15 price target (more than 15% below current levels).  More SPWRA analysis here

Auriga Initiates Coverage Of Several Solar Stocks – TSL, SOLF, YGE, STP, CSIQ, FSLR, SPWRA


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