Auriga is out with a few solar calls this morning.
It maintains its Hold rating on SunPower (SPWRA) with a price target of $12.
“The quality of SPWRA’s earnings continues to be a problem for us. Through the magic of non-GAAP accounting, SunPower was able to beat the Street consensus of $0.10, while on a GAAP basis the company recorded a loss of $0.06. The story on the call was largely unchanged, with management exuding confidence in the business model, visibility of revenue recognition through 2011, and its belief that SunPower markets a cost-effective and competitive ($/kWh) product. While there is some merit to these points, we still find a lack of earnings power to this business model. SunPower’s Asian competitors are ramping capacity faster, and thus taking market share, while exhibiting greater earnings power…The SunPower story may eventually play out over the next several years, but we are hard pressed to put new money into this name when there are more transparent business models with greater earnings power within the solar sector.”
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Auriga upgraded JA Solar (JASO) from Hold to Buy and raised their price target from $5.75 to $8.
“JA Solar (JASO) stock is trading at 5x our 2011 EPS, and when using a discounted multiple of just 8x, we find 45% upside from the current price. We simply cannot ignore the low valuation nor the expected upside in shares of JASO…we can now forecast year-over-year EPS growth, which was a significant hurdle that we needed to clear in order for us to be more positive on the name.”