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A Better Takeover Offer For Canadian Solar Is Unlikely: Here's Why

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A Better Takeover Offer For Canadian Solar Is Unlikely: Here's Why
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Earnings Scheduled For May 16, 2018

The list of solar companies that have been taken private may see the addition of Canadian Solar Inc. (NASDAQ: CSIQ). The company's chairman, president and CEO Dr. Shawn Qu offered shareholders $18.47 to buyout the company, but some investors are anxiously awaiting if a superior bid will be presented.

The Analyst

Axiom's Gordon Johnson downgraded Canadian Solar's stock from Buy to Hold with an unchanged $17 price target.

The Thesis

Qu's takeout offer of $18.47 may be as good as an offer investors will ever see for three key overhangs surrounding the stock, Johnson said in a note. These include:

  • The company's sale of solar projects to KEPCO in the fourth quarter will likely be delayed to the first quarter of 2018, which implies a "severe cut" in revenue and EPS in the fourth quarter;
  • The company's higher than expected margin sale of solar assets to Shenzhen Energy could be at risk according to some experts; and
  • The possibility that the financing for the go-private deal would not materialize.

Nevertheless, the takeout offer put a floor on the stock and the analyst's view of the company's long-term project asset sales remains "favorable." At the same time, the few near-term execution risks could result in another year of margin contraction in the core module business.

Price Action

Shares of Canadian Solar are up 45 percent in 2017.

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Latest Ratings for CSIQ

DateFirmActionFromTo
Mar 2018JP MorganDowngradesNeutralUnderweight
Mar 2018UBSInitiates Coverage OnSell
Feb 2018JP MorganUpgradesUnderweightNeutral

View More Analyst Ratings for CSIQ
View the Latest Analyst Ratings

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