Despite a trio of downgrades since Halloween, shares of Canadian Solar (CSIQ) offer an excellent opportunity as a high beta buy if you believe the late-day market rally will continue. I bought some shares today at $5.35 and for a while it looked poised to plunge much lower with the overall market until the massive, late-day rally led to double digit gains and saw the stock briefly trade over 7 bucks from an intra-day low around 5 bucks.
A summary of the downgrades includes:
1.) Piper cuts to neutral from buy – price target to $11 from $30 – 2008 EPS estimate cut to $1.97 from $2.51 and 2009 EPS cut to $1.34 from $2.84
2.) Deutsche Bank cuts to hold from buy – price target to $12 from $36
3.) Canaccord Adams cuts to hold from buy – price target to $10 from $21
The analysts cite several common issues plaguing the industry, including the weakening Euro versus the U.S. Dollar, difficult credit markets (increased cost + decreased availability of credit), and a decline in the average selling prices for solar modules. However, with CSIQ touching an all-time low today at $5.05 compared to a closing price of $9.68 on Halloween when the downgrades began; the stock more than reflects the concerns cited in the analyst notes.
Even with today's late-day rally, CSIQ is still down by nearly 50% from its 50-day moving average and about 75% off its 200-day moving average while today's closing price of $6.62 only values the company at about 5X the significantly lowered 2009 earning estimate by Piper and less than half the IPO price of about two years ago around 15 bucks. With about 10% of the shares outstanding held short, $65M in cash, $142M in debt, a market cap of $186M, and upcoming earnings; CSIQ is also a candidate for a short squeeze rally if the company posts strong results and issues guidance above the significantly reduced estimates from the past two weeks.
$6.4 (11/13/08)
