Hapoalim Securities: Investors Should Take Advantage Of Near-Term Strength In Solar Industry
Analyst Aaron Chew of Hapoalim Securities assumed coverage of the solar industry “with a cautious stance heading into 2H10 and 2011.”
According to Hapoalim Securities, “While we expect strong 2Q10 results along with positive management commentary to keep stocks well bid through summer, with valuations not yet reflecting deteriorating fundamentals in 2011, we encourage investors to take advantage of near‐term strength to lighten up on positions. Though we now offer a less onerous outlook for installation growth in 2011 and beyond, we are nonetheless well below consensus on our outlook for shipment growth of only 3.5% and ASP declines of (20%) next year. The decline of over (26%) year‐to‐date (vs. (2%) for the S&P 500) has arguably priced at least some of these concerns in.”
“Admittedly, we have faith that secular tailwinds will continue to drive global installation growth but the crux of our long‐term thesis rests on the notion that the future health and welfare of the industry is driven more by pricing and margins than merely MWs shipped,” the analyst says.
“To exacerbate matters, the bright unit growth outlook continues to invite higher levels of new capacity, with the recent entrance of Korea technology powerhouses like Samsung and LG particularly foreboding for industry margins… In the meantime, we expect the outlook for larger‐than‐expected price declines and margin compression to weigh on the stocks, and we await a further shakeout before seeking an entry point with the long‐term survivors,” Aaron Chew says.
Hold
Trina Solar (NYSE: TSL) – Target price set at $17.
Sell
First Solar, Inc (NASDAQ: FSLR) – The price target has been raised from $65 to $100, “as we believe technological development and cost reductions in c‐Si will diminish CdTe’s advantage and ultimately pressure its margins and high valuation multiple,” the analyst says.
Yingli Green Energy Holdings (NYSE: YGE) – Target price set at $8.00.
Suntech Power Holdings (NYSE: STP) – Target price set at $6.00.
Upgrade
SunPower Corporation (NASDAQ: SPWRA) from “sell” to “hold.” However, the price target for the company’s stock has been lowered from $13.00 to $12.00. Hapoalim Securities says, “We believe its ongoing shift from core manufacturing to project development will ultimately improve its prospects for both survival and sustainable margins, while we believe its high exposure to Italy, broadly negative sentiment leaves it in a good position to surpass 4Q10 and 2011 earnings estimates.”
