Canadian Solar's (CSIQ) Margin Guidance Spooks Investors, Buy Industry Position Remains Strong - Roth

Roth Capital affirms Canadian Solar (Nasdaq: CSIQ) at Buy with a price target of $40 following Q3 results and guidance.

Analyst Philip Shen offered some overall thoughts on the company following results: Despite a strong Q3 performance, weaker-than-expected margin guidance spooked investors. The market psychology for solar stocks has been challenging of late with any type of weakness serving as the lightning rod of attention. Given its capacity expansion plans, best-in-class brand, strong B/S, and rich downstream set of projects, we continue to believe that CSIQ is one of the best companies among its peers.

Key takeaways from the report:

1. ASPs. Q4 ASPs could be as low as 63-64c/W due to mix and currency movements;

2. Q4 GMs may experience a few headwinds. Duty deposits could result in a 2% reduction in GMs; ASPs could decline due to geographic mix; Currency weakness may result in a 1-2% negative impact; Project sales may not be as margin rich as Q3; and

3. Quality balance sheet continues to improve due to strong contribution from core module business as well as high margin project sales. Cash in the Q4 increased from $341mn in Q2 to $408mn which helped to improve the net debt/cap ratio which declined from 47.7% in Q2 36.1% in Q3. We believe, over the next year, CSIQ's balance sheet could continue to strengthen as we estimate ~$240mn of cash could be raised from the sale of the 387MW Canadian project backlog.

For an analyst ratings summary and ratings history on Canadian Solar click here. For more ratings news on Canadian Solar click here.

Canadian Solar closed at $28.08 yesterday.

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