Is A YieldCo Enough For Canadian Solar Investors?

Canaccord analysts Jed Dorsheimer and Jason Rosenfeld on Tuesday reiterated a Buy rating, while trimming their price target for shares of Canadian Solar Inc. CSIQ from $45.00 to $40.00. The firm continues to believe that the company’s module business will witness “a tightening supply/demand during this bullish end-of-year adoption cycle, which should benefit CSIQ's core operations.”

While valuation was dramatically impacted by recent YieldCo and solar volatility, the analysts still think the fundamental PV growth story remains intact. Having said this, they also note that management has remained quiet regarding YieldCo news, although it mentioned it is seeking to file its confidential SEC paperwork "very soon," still targeting the end of the year -- or beginning of 2016.

See Also: Lights Out For Canadian Solar

The note points out a few investment highlights:

• Second-quarter earnings and revenues came in well ahead of the firm’s expectations. The sales mix continued the company's turn towards module sales as it positions its business strategy from a build-to-sell model to a build-to-hold model. The analysts continue to believe the quarterly results should have a negligible impact on Canadian Solar shares “until investors have ample details on the potential YieldCo.”
• “The recent YieldCo downward spiral does little to bolster sentiment or valuation around Canadian Solar's pending YieldCo.” In fact, the experts question “whether current investor demand for YieldCos will be enough for the company to go to market with a YieldCo.” They recall Sunedison Inc SUNE’s Global YieldCo, TerraForm Global Inc GLBL, pricing at $15 last month, considerably below the expected range of $19 to $21.
• The analysts think Canadian Solar will continue to study its options, keeping track of yields moving into the second half of the year, “ready to pull the trigger on any uptick in demand.”