Auriga Slashes Chinese Solar Stock Targets; Now Generally Bearish

A littlemore than a month ago, Auriga initiated coverage on solar stocks and was generally bullish outside of its Sunpower(SPWRA) Sell rating.  This morning, the firm is slashing price targetsof some China solar companies, but is bullish in First Solar (FSLR).  Idon’t really understand the cutting of price estimates right now whichare due to Euro exposure.  The Euro has been deteriorating for some time now.  Granted, Euro weakness has accelerated in recent weeks, but it’sbeen in a strong trend DOWN since the beginning of the year. 

Canadian Solar (CSIQ) gets a downgrade from Buy to Hold and price target cut from $21 to $13.  “Our May 5 upgrade of CanadianSolar is short-lived as the recent depreciation in the Euro has removedour forecasted upside. We are forced to downgrade the shares to Hold and see little reason to sell shares at current prices, but at the sametime, cannot support putting additional investments to work in shares of Canadian Solar.” More CSIQ analysis here

Maintains Hold on Suntech Power (STP) but lowerstarget price from $15 to $11.  “Our model assumes that roughly 55% ofSuntech’s revenue will be denominated in Euros, and are only 40% hedgedthrough 2011. With the exception of a significant capacity increase, weare pressed to find a catalyst to be more constructive with shares ofSTP.”

Maintains Hold rating on JA Solar (JASO). “JASO’s model, while having significantly less foreign currency exposure than its peers, is still negatively affected by the depreciation of the Euro. Our model assumes that roughly 20% of JA Solar’s revenue will bedenominated in Euros, and are only 40% hedged through 2011.”   Theylowered FY11 GAAP EPS estimate from $0.81 to $0.71. More JASO analysis here

Maintains Buy rating on Trina Solar (TSL), butslashes price target from $34 to $24.  “Our model assumes that roughly65% of Trina’s revenue will be denominated in Euros, and are only 40%hedged through 2011… We believe Trina is seeing significant demand forits product across Europe, and given our CSI data analysis, may bestarting to see market share wins in the US.”
FY11 GAAP EPS estimatelowers from $2.29 to $1.62. More TSL analysis here

Maintains Buy on Solarfun (SOLF) but decreases price target from $13 to $9.  “Our model assumes that roughly 65% ofSolarfun’s revenue will be denominated in Euros, and are only 40% hedged through 2011… We believe the company can outperform the current marginstructure assumed by the consensus thus we see near-term upside to thestock because we are ahead of the 2010 consensus estimates. However, wealso note that without further capacity increases, we are forecasting adown year in EPS results for 2011.”  Decreases FY11 GAAP EPS estimatefrom $1.03 to $0.69.  More SOLF analysis here

Upgrades First Solar (FSLR) from Hold to Buy with pricetarget of $138.  “We attribute the recent decline in shareprice to the depreciation of the Euro relative to the Dollar, and notbecause of fundamental change with regard to supply/demand within thesolar industry. With the recent announcement of FSLR pushing projectbusiness into 2011, our model recognizes that more module sales will bedenominated in Euros in 2010. That said, we also recognize and creditFSLR’s aggressive currency hedging activities and ~15% natural hedgefrom manufacturing in Germany to buffer the effect of a weakened Euro.Our new price target of $138 is 20X our 2011 EPS estimate of $6.89.”  More FSLR analysis here

Auriga Slashes China Solar Price Targets (CSIQ, JASO, SOLF, TSL, STP);Upgrades First Solar (FSLR) To Buy


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