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Canadian Solar (CSIQ) Loses Ground as Barclays Cuts Rating

Zacks Equity Research
Updated

Shares of Ontario, Canada-based solar company, Canadian Solar Inc. CSIQ, dropped 4.23% yesterday after Barclays downgraded the stock rating to "Equal Weight" from "Overweight" on Aug 24.

CANADIAN SOLAR Price

 

CANADIAN SOLAR Price | CANADIAN SOLAR Quote

The firm also slashed its price target to $14 from $24 as it believes that Canadian Solar’s stock poses a greater risk relative to its peers, such as First Solar Inc. FSLR and 8point3 Energy Partners LP CAFD.

The firm remained careful on the bigger issue of “unintended consequences of government policy distorting the solar supply/demand relationship on a global scale”. Hence, it now expects the company to generate gross margins of 12.7% in 2017, down from 16.2% in 2016. Even, Barclays lowered its earnings estimates for 2016, 2017 and 2018 to $2.00, $1.54 and $1.66 from $2.35, $2.65 and $3.15, respectively.

Although Barclays acknowledges Canadian Solar’s advantage of high module market share and operating history, it believes that the company's net debt to EBITDA ratio poses a greater risk than peers heading into 2017.

Q2 at a Glance

Canadian Solar reported second-quarter earnings of 68 cents per share, beating the Zacks Consensus Estimate of 40 cents by a whopping 70%. Reported earnings also surged 119.4% from the year-ago tally of 31 cents.

Again, the company’s total revenue of $805.9 million surpassed the Zacks Consensus Estimate of $711 million by 13.3%. Revenues were also up 26.6% from $636.7 million reported in the prior-year quarter (read more: Canadian Solar Beats on Q2 Earnings and Revenues).

Zacks Rank & A Key Pick

Canadian Solar presently carries a Zacks Rank #4 (Sell). Investors may consider a better-ranked stock in the space like Sunrun Inc. RUN that sports a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
FIRST SOLAR INC (FSLR): Free Stock Analysis Report
 
CANADIAN SOLAR (CSIQ): Free Stock Analysis Report
 
SUNRUN INC (RUN): Free Stock Analysis Report
 
8POINT3 ENERGY (CAFD): Free Stock Analysis Report
 
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Zacks Investment Research