According to StreetInsider.com,Collins Stewart is maintaining its Sell rating on both Suntech Power(STP) and Solarfun (SOLF) but raising its price targets on both. It’sraising the price target on STP from $6.50 to $10 and raising the pricetarget on SOLF to $3.
Collins analyst says, “Our CY09 forecast calls for STP generate$1.73B in sales and EPS of $0.20, both of which are below the consensusof $1.86B and $0.40. Our forecast is based on module ASPs falling toaverage $2.37/watt for the year, down from an estimated $3.83/watt inCY08. Recent channel checks have STP module ASPs already in the$2.40-2.50/watt range. STP s wafer prices are assumed to decline,though we note that its large contract with MEMC is likely$0.0.20-0.40/watt about market at this point and will weigh on STP’s GMunless further renegotiated. STP may incur a variety of one-time gainsand charges in 1Q09 related to the repurchase of debt at a discount andpotentially inventory write downs…We maintain a sell rating on STP aswe believe its earnings will remain depressed throughout CY09 and thatits valuation is well above its peers.”
“We maintain a Sell rating on SOLF, but have raised our PT to$3. Our price target is based on a 9x P/E applied to our CY10 EPSforecast of $0.34. The primary risk to our Sell rating is SOLF beingacquired at a premium. Good Energies II LP owns approximately a 36.4%stake in SOLF and has investments in other solar assets such as TrinaSolar (NYSE: TSL)and Q-Cells. It is possible that Good Energies may be able to arrangemerger of SOLF with some other business at a price above currentlevels. The other primary risk to our Sell rating would be astronger-than-expected recovery of the solar market in 2H09.”
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