Canadian Solar Gaps Higher On Canaccord Initiation

Shares of Canadian Solar CSIQ are trading about three percent higher Wednesday after Canaccord started coverage of the company with a Buy rating and $43 price target (37.3 percent upside).

Analyst Josh Baribeau first commented on the space as a whole, “financial innovation such as risk pooling, securitization, de-levering etc. continue to drive the costs of capital and system costs downward, making solar energy more compelling.”

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Several company specific catalysts warrant the Buy rating. These include the comparatively low cost of manufacturing, the largest commercial backlog in the industry and a sales mix with less Chinese focus.

Regarding Canadian Solar valuation, Baribeau starts by commenting that, “valuation in the solar industry is a bit challenging at this juncture as most of the industry lost money last year, but continues to grow the top line.”

Right now the solar industry is trading at approximately 14 times next year’s earnings and one times next year’s sales. The $43 price target was granted with a 10 times forward PE ratio, assuming 33.5 2015 earnings growth.