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Why Canadian Solar Is Pretty With Or Without A YieldCo

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Canadian Solar Inc. (NASDAQ: CSIQ) is scheduled to announce its second quarter financial results next Tuesday. In a report issued Friday, JPMorgan analysts Paul Coster, Mark Strouse and Paul J Chung provide a preview of the results.

According to the note, they expect upbeat comments regarding end-market demand in each main region, similar to what happened with other Tier-1 solar DevCos, which have already reported their quarterly results.

Having said this, however, they warn that the company’s GAAP results could be muddled, mainly due to YieldCo project holdbacks. “Given the volatility in the YieldCo space, with average dividend yields ~200bps higher than they were two months ago,” the analysts expect management to comment on the potential YieldCo, and if it would be value accretive at current yields.

The experts assure that, if Canadian Solar chooses to pass on the YieldCo vehicle, returning to its historical build-to-sell model instead, the company can deliver in EPS of roughly $4.00-$5.00 in 2015 and 2016. This means that its stock would be trading at a mid-single-digit P/E multiple. So, with or without a YieldCo, valuation looks attractive.

Consequently, the firm maintains an Overweight rating and $39.00 price target on shares of Canadian Solar.

Previewing Q2

The analysts at JPMorgan expect the company to deliver second quarter EPS of $0.14 on revenue $597 million, versus the Street’s consensus of $0.13 and $596 million.

The firm is anticipating modules revenue of $441 million and solutions revenue of  $156 million, and gross margins of 14.7 percent, in line with guidance of 13 percent-15 percent.

Latest Ratings for CSIQ

DateFirmActionFromTo
Jan 2021CitigroupInitiates Coverage OnBuy
Jan 2021Goldman SachsDowngradesBuyNeutral
Nov 2020CICCUpgradesMarket PerformOutperform

View More Analyst Ratings for CSIQ
View the Latest Analyst Ratings

 

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