FBR Capital Downgrades Canadian Solar (CSIQ) to Market Perform; Sees Weaker Margins
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FBR Capital downgraded Canadian Solar (NASDAQ: CSIQ) from Outperform to Market Perform with a price target of $12.00 (from $23.00), saying manufacturing issues and timing on project sales to clip margins.
Analyst Carter Driscoll commented, "CSIQ delivered a decent 3Q16 despite a weak solar market. However, not surprisingly, CSIQ lowered 2016 guidance on higher-than-expected pricing pressure. Surprisingly, module volumes are constrained by manufacturing issues. CSIQ's new 850 MW cell plant in Southeast Asia will take at least another quarter to build, forcing CSIQ to source more material from third parties and negatively impacting margins. In addition, CSIQ's existing 1 GW cell plant, damaged by a tornado in June 2016, will not be fully back on line until April. CSIQ again stated it is committed to recycling cash and de-levering by selling operating assets in Canada and China but hedged the timing between 4Q16 and 1Q17. It is also less clear when the company will sell its U.S. operating plants, which would help offset core module sales. We have lowered our rating to Market Perform and our price target to $12 from $23. We acknowledge that ramping project sales could be a catalyst, but we prefer to wait and see both the pace and ultimate sales price before we are comfortable saying the worst of the downturn is over."
Shares of Canadian Solar closed at $10.68 yesterday.
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