Market Overview

Gordon Johnson: Inorganic Demand Driving US Solar Bull Market

Gordon Johnson: Inorganic Demand Driving US Solar Bull Market

In a way, the solar scene is poised to prove the maxim “ignorance is bliss.”

Gordon Johnson, managing director of Axiom Capital Management, thinks uncertain regulatory catalysts are cause for hope among solar investors.

Johnson expects a bull market in U.S. solar until November 2017 ━ possibly as late as January 2018 ━ considering the possible passage of a Section 201 tariff. The International Trade Commission is expected to recommend action to the president by Oct. 23, and the president will make his decision within one to three months.

If it fails to pass, the outcome could prove detrimental to the entire industry. If it succeeds, Axiom foresees positives for U.S. companies at the expense of Chinese competitors.

And in the meantime, the uncertainty is driving independent power producers to stockpile modules at presently inexpensive prices ahead of anticipated price hikes.

“It’s not organic demand,” Johnson said Wednesday on Benzinga's PreMarket Prep radio show. “It’s inorganic demand due to uncertainty around government policy, but nonetheless we believe it will drive estimates higher across the solar module space.”

Who Profits?

The circumstance has positive implications for First Solar, Inc. (NASDAQ: FSLR), which Axiom upgraded Wednesday from Hold to Buy.

“Based on our checks at the Intersolar Conference last week, we are hearing First Solar is delaying the ramp up of series 6 technology and instead focusing on ramping back up its series 4 technology, and given we believe First Solar is selling modules at $0.50 to $0.60 between that level, and also we’re hearing rumblings that it’s sold out through third quarter 2018, we believe the company is going to show potentially significant upside to consensus estimates,” Johnson said.

An anticipated earnings beat could also prompt a “continued violent move higher on the stock.”

Related Link : Will Trump’s Solar Border Wall Be A Boon For Clean Energy Or More Fat For Taxpayers?

The optimism extends to JA Solar Holdings, Co., Ltd. (ADR) (NASDAQ: JASO), which Axiom upgraded from Sell to Hold.

“We don’t think it makes sense to be shorting J Sol right now,” Johnson said, asserting a $7 price target.

The stock is protected by Section 201, which drove demand for U.S. modules and prompted Chinese rivals to cancel forward-sold contracts and resell modules at higher prices.

“So they’re price gouging, but that will resonate for higher earnings price in both Q2 and we think more so in Q3,” Johnson said.

Additionally, Axiom maintains Buys on Canadian Solar Inc. (NASDAQ: CSIQ) and JinkoSolar Holding Co., Ltd. (NYSE: JKS), but it sees little in Yingli Green Energy Holding Co Ltd (ADR) (NYSE: YGE) and SunPower Corporation (NASDAQ: SPWR).

In fact, it considers the latter investment a “big mistake,” as the firm has great exposure to Section 201 and is expected to collapse with its passing.

Meanwhile, Yingi burns a lot of cash, has a lot of debt and operates at a higher cost per watt.

“Compared to its peers, it’s in the worst position,” he said.

Latest Ratings for CSIQ

Nov 2019MaintainsNeutral
Nov 2019MaintainsNeutral
Apr 2019AssumesNeutral

View More Analyst Ratings for CSIQ
View the Latest Analyst Ratings

Posted-In: Analyst Color Upgrades Price Target Commodities Top Stories Markets Analyst Ratings Trading Ideas Best of Benzinga


Related Articles (CSIQ + FSLR)

View Comments and Join the Discussion!

Latest Ratings

TSCOPiper SandlerMaintains119.0
UNPBMO CapitalMaintains200.0
UNPArgus ResearchMaintains205.0
ISRGJP MorganMaintains665.0
EHTHRBC CapitalMaintains132.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at