Needham Updates Solar Stock Ratings $FSLR, $SPWRA, $SOLF, $STP, $JASO
Needham& Company has come out with updates on their ratings of severalsolar stocks. Hat tip to Street Insider for the analyst comments:
Initiated coverage on First Solar (FSLR) with an Underperform and $92 price target.
“As the world’s largest producer ofsolar panels with the best cost structure, First Solar is benefitingfrom strong near-term demand and a growing pipeline of utility scalesolar projects. However, we are concerned that margins will deterioratefurther in 2H10 and 2011, and we believe stocks of companies withfalling margins typically under perform the market. Additionally, webelieve the bulls are overestimating the upside tied to First Solar’sNorth America solar project pipeline, and underestimating the downsiderisks in Germany and other European countries. We see downside risk tocurrent consensus estimates and expect projected earnings to decline in2011. Given that FSLR shares are trading at a rich multiple of 17X 2011P/E and at a 42% premium over peers’ average, we recommend investors use the recent rebound to sell their positions.”
Initiated coverage on Solarfun Power (SOLF) with a Buyrating and $9 price target.
“As the leader in OEM solarmodule business, we believe SOLF could see above average growth ashigh-cost producers in Europe increasingly use lower cost OEM modules to reduce costs. We believe the new management team has done a good jobstrategically focusing the company on its OEM module business andimproving operations to lower costs. Long-term, we believe SOLF couldbecome an attractive acquisition target for a large contractmanufacturer wanting to enter the solar production business. While itshigh exposure to Germany is a risk given the expected FIT cuts in 2H10and 1H11, we see upside to full year shipment guidance as the companyexpands into additional markets. We recommend investors buy SOLF as amore defensible play in the volatile solar sector.”
Initiated coverage on Suntech Power (STP) with a Holdrating.
“As the world’s largest producer of crystallinesolar cells/modules, we believe Suntech has the most bankable Chinesebrand, enabling the company to charge a price premium over competitiveChinese brands. While Suntech started earlier than its competition onthe development of high-efficiency solar cells, delays continue to limit the contribution from its promising Pluto technology. We believeSuntech’s cost per watt will remain higher than the leading Chineseproducers, especially given the near-term tightness in wafer supply.Furthermore, the near-term overhang of the Euro is having a large impact to earnings given its sizable currency exposure. With the sharestrading at a premium over peers, we suggest investors wait for a clearcatalyst, such as margin expansion or a successful ramp of Pluto, before getting aggressive.”
Downgrades SunPower (SPWRA) from Buy to Hold.
“We are downgrading SunPower to Hold due to increased downside risk toestimates and currency headwinds. We see increased risk surroundingSunPower’s expanded European pipeline of systems business due to thepossibility of additional subsidy cuts, currency headwinds and growingmacro concerns in Europe. Furthermore, SunPower continues to facepricing pressure despite strong near-term demand. With a lack of nearterm catalysts, we expect SPWRA shares to remain range bound. Therefore, we recommend investors wait on the sideline at this time.”
Maitains Hold on JA Solar (JASO), but lowers price target from $8 to $6.50.
“We have lowered our 2010 revenue/GAAPEPS estimates to $1.10 billion/$0.70, and our 2011 estimates to $1.14billion/ $0.65, reflecting our more moderate sector view. We arelowering our target price from $8 to $6.50, which is based on 10 2011P/E or 0.9X 2011 EV/S.”
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