Roth Sees Canadian Solar's (CSIQ) Cost Management Actions Panning Out; Affirms at 'Buy'
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Roth Capital affirms Canadian Solar (Nasdaq: CSIQ) at Buy with a price target of $20 following Q2 results and outlook issued early Thursday.
Analyst Philip Shen offered the following overall thoughts today:
With the stock down 14% in August alone, CSIQ closed up 18% on short covering as the market was looking for a miss and even weaker guide, especially at the margin level. While we are just at the beginning of this industry downturn, our view is that CSIQ will likely be one of the best positioned companies in our module universe given its disciplined approach to navigating this downturn (aggressively managing inventory, minimizing bad debt, having a diversified sales network, and employing leading technology).
Heading into the quarter, investors were also concerned about the profitability of the company's 1.3GW latestage U.S. pipeline given recent peer earnings calls. It appears economics for the Recurrent pipeline may be healthier or more stable relative to others. Between the U.S. project pipeline and other projects expected to COD in 2017, we estimate the company could generate ~$6 in EPS that could support earnings over the next two years.
Near-term upside catalysts ahead include Recurrent COD announcements and partial/full sale announcements of U.S. projects that could drive earnings higher. Longerterm, the successful launch of a J-REIT in Japan targeted for Q2/Q3’17 could also be a positive. That said, negative industry data points could cap gains in shares. For 2016, we model 100MW of project sales in H2, but the company is expected to have 1.37GW in operation by year end that could be sold and drive upside to our estimates.
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