Auriga Slashes China Solar Price Targets (CSIQ, JASO, SOLF, TSL, STP); Upgrades First Solar (FSLR) To Buy

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08:30:10 am on May 24, 2010

A little more than a month ago, Auriga initiated coverage on solar stocks and was generally bullish outside of its Sunpower (SPWRA) Sell rating.  This morning, the firm is slashing price targets of some China solar companies, but is bullish in First Solar (FSLR).  I don’t really understand the cutting of price estimates right now which are due to Euro exposure.  The Euro has been deteriorating for some time now.  Granted, Euro weakness has accelerated in recent weeks, but it’s been in a strong trend DOWN since the beginning of the year. 

Canadian Solar (CSIQ) gets a downgrade from Buy to Hold and price target cut from $21 to $13.  “Our May 5 upgrade of Canadian Solar is short-lived as the recent depreciation in the Euro has removed our forecasted upside. We are forced to downgrade the shares to Hold and see little reason to sell shares at current prices, but at the same time, cannot support putting additional investments to work in shares of Canadian Solar.” More CSIQ analysis here

Maintains Hold on Suntech Power (STP) but lowers target price from $15 to $11.  “Our model assumes that roughly 55% of Suntech’s revenue will be denominated in Euros, and are only 40% hedged through 2011. With the exception of a significant capacity increase, we are pressed to find a catalyst to be more constructive with shares of STP.”

Maintains Hold rating on JA Solar (JASO).  “JASO’s model, while having significantly less foreign currency exposure than its peers, is still negatively affected by the depreciation of the Euro. Our model assumes that roughly 20% of JA Solar’s revenue will be denominated in Euros, and are only 40% hedged through 2011.”   They lowered FY11 GAAP EPS estimate from $0.81 to $0.71. More JASO analysis here

Maintains Buy rating on Trina Solar (TSL), but slashes price target from $34 to $24.  “Our model assumes that roughly 65% of Trina’s revenue will be denominated in Euros, and are only 40% hedged through 2011… We believe Trina is seeing significant demand for its product across Europe, and given our CSI data analysis, may be starting to see market share wins in the US.”
FY11 GAAP EPS estimate lowers from $2.29 to $1.62. More TSL analysis here

Maintains Buy on Solarfun (SOLF) but decreases price target from $13 to $9.  “Our model assumes that roughly 65% of Solarfun’s revenue will be denominated in Euros, and are only 40% hedged through 2011… We believe the company can outperform the current margin structure assumed by the consensus thus we see near-term upside to the stock because we are ahead of the 2010 consensus estimates. However, we also note that without further capacity increases, we are forecasting a down year in EPS results for 2011.”  Decreases FY11 GAAP EPS estimate from $1.03 to $0.69.  More SOLF analysis here

Upgrades First Solar (FSLR) from Hold to Buy with price target of $138.  “We attribute the recent decline in share price to the depreciation of the Euro relative to the Dollar, and not because of fundamental change with regard to supply/demand within the solar industry. With the recent announcement of FSLR pushing project business into 2011, our model recognizes that more module sales will be denominated in Euros in 2010. That said, we also recognize and credit FSLR’s aggressive currency hedging activities and ~15% natural hedge from manufacturing in Germany to buffer the effect of a weakened Euro. Our new price target of $138 is 20X our 2011 EPS estimate of $6.89.”  More FSLR analysis here

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