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MARKETS LIVE BLOG:

STOCKS RISE, LED BY STELLAR ALPHABET, MICROSOFT EARNINGS

Results from 'Magnificent Seven' duo show cloud revenue boosted by strong AI demand

What Makes Daqo New Energy (DQ) a Solid Choice Right Now

Zacks Equity Research

Daqo New Energy Corp.'s DQ stock looks promising at the moment. The company is well placed for growth on the back of higher volumes from its Phase 4A capacity expansion and actions to reduce production costs.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

The company has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.

Let's see what makes this leading producer of high-purity polysilicon a compelling investment option at the moment.

Price Performance

Daqo New Energy has outperformed the industry it belongs to over a year. The company’s shares have rallied 66% compared with 24.3% decline recorded by the industry.



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Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices.  Over the past two months, the Zacks Consensus Estimate for Daqo New Energy for 2020 has increased 8.4%.

Solid Growth Prospects

Growth prospects for Daqo New Energy look encouraging. The Zacks Consensus Estimate for earnings for 2020 of $8.78 for the company reflects an expected year-over-year growth of a whopping 334.6%. The company also has an expected long-term earnings per share growth rate of 29%, well above the industry average of 9.6%.

Growth Drivers in Place

Daqo New Energy is expected to benefit from higher production volumes driven by its Phase 4A polysilicon expansion project. The company, in September 2019, completed the construction and installation of the Phase 4A project. The company, in the fourth quarter of 2019, ramped up production of the additional capacity (of 35,000 metric tons) from this expansion and reached full production capacity in December 2019. With the ramp up of the additional capacity, the company is seeing significant benefits from improved product quality, economics of scale and manufacturing efficiency.

The company’s polysilicon production volumes surged 72% on a sequential comparison basis to 16,204 metric tons in the fourth quarter. It expects polysilicon production volumes for the first quarter of 2020 to be roughly 18,000-19,000 metric tons assuming its facilities to run at full utilization.

Daqo New Energy is also benefiting from lower production costs, as witnessed in the fourth quarter, driven by the Phase 4A expansion. It reduced production costs by 8.5% sequentially in the quarter. The company’s energy efficiency efforts and enhanced manufacturing efficiencies are also contributing to lower costs. It expects continued reduction in production costs in the first quarter.

Moreover, the company is expected to benefit from higher sales volumes. The company expects polysilicon sales volumes to external customers of 17,500-18,500 metric tons in the first quarter, higher than 13,291 metric tons it recorded in the fourth quarter. This should support its first-quarter revenues.

DAQO New Energy Corp. Price and Consensus

 

DAQO New Energy Corp. Price and Consensus
DAQO New Energy Corp. Price and Consensus

DAQO New Energy Corp. price-consensus-chart | DAQO New Energy Corp. Quote

 

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space are Newmont Corporation NEM, NovaGold Resources Inc. NG, Franco-Nevada Corporation FNV.

Newmont has an expected earnings growth rate of 97% for 2020. The company’s shares have gained roughly 26% in the past year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

NovaGold has a projected earnings growth rate of 11.1% for 2020. It currently carries a Zacks Rank #1. The company’s shares have surged roughly 77% in a year.

Franco-Nevada has a projected earnings growth rate of 24.7% for 2020. The company’s shares have rallied around 34% in a year. It currently has a Zacks Rank #2.

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Newmont Goldcorp Corporation (NEM) : Free Stock Analysis Report
 
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
 
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Novagold Resources Inc. (NG) : Free Stock Analysis Report
 
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